Local assets under management rise 9% to S$2.6 trillion in 2015

Singapore

A NEWLY-RELEASED Monetary Authority of Singapore (MAS) report showed that despite turbulent markets, Singapore's asset management industry enjoyed a reasonably good year in 2015, bolstered by its position within Asia and inflows into alternative strategies.

Assets under management (AUM) in Singapore grew 9 per cent to S$2.6 trillion in 2015, said the 2015 Singapore Asset Management Survey, MAS's annual survey of the local asset management industry.

The number of fund managers registered and licensed with the MAS grew by 37 to 628 in total.

"Despite an uncertain global macroeconomic backdrop, investors continued to show interest in Asia investment strategies," the MAS said.

Net inflows were S$203 billion in 2015. Alternative AUM grew 29 per cent, with new money notably going into private equity, venture capital and real estate funds. Alternatives now account for a sixth of total AUM.

Traditional AUM, such as stock and bond funds, grew just 4 per cent, down from a 38 per cent surge in 2014 when global asset managers expanded in Singapore.

Singapore AUM growth in 2015 was in line with the region. Asia AUM, excluding Japan and Australia, grew 10 per cent to US$5.2 trillion in 2015.

Globally, however, AUM rose just one per cent to US$71.4 trillion. Global AUM growth in 2015 was weighed down by a slowdown in emerging markets and fears of monetary policy normalisation in the US, the MAS said.

It said that several emerging market managers also saw outflows from their equity and bond funds.

Disappointing public market returns have pushed investors into illiquid and financially riskier assets in search of higher returns, the MAS added.

After a sharp rally, China's stock market crashed in the second half of 2015, sending a number of Asian markets into a tailspin. This year, markets declined again at the beginning of the year before recovering somewhat.

Yet, it is not all doom and gloom for local fund managers exposed to the public markets.

Wong Yu Liang, co-founder of Lumiere Capital, which invests in Hong Kong small-capitalisation stocks, told The Business Times over the phone that some long-term clients added money in recent months to take advantage of what they perceived as low valuations.

His fund might be down 15 per cent in Singapore-dollar terms as at end-August this year, significantly underperforming its benchmark, but net inflows amounted to roughly 10 per cent of assets, bringing AUM to around S$100 million.

Even while the broader Hong Kong market has recovered, small-capitalisation stocks have lagged behind larger ones. "There's a huge valuation discrepancy," Mr Wong said.

Philipp Koch, a partner from consultancy McKinsey's financial services practice, told a gathering of fund managers here in mid-September that the global asset management industry is still in a robust state of health.

Asset managers continue to be valued higher and enjoy better returns on equity than other financial services players such as insurers and banks, he said at the event, hosted by McKinsey and the Investment Management Association of Singapore (Imas).

But in the longer term, he said, trends such as a low-return environment, the rise of passively-managed funds, more informed clients and digital innovations will affect the industry.

Kwek Wei Ren, portfolio manager at One Asia Investment Partners, told BT in an e-mail on Wednesday that the hedge fund industry is facing challenges as pension funds are cutting their allocations to the asset class. One Asia was launched in 2014 and AUM has grown steadily to US$700 million today, mostly across fixed income strategies, he said.

"In Asia, fund strategies relating to emerging markets, credit and CTAs (commodity trading advisers) are attracting inflows at the expense of long-short equities and global macro," he said.

Strong growth is expected in customised wealth management services for clients to deal with fast-changing market cycles and regulations, Mr Kwek added.