Singapore fund managers troubled by trade war, geopolitical risks

Singapore

CONCERNS over the US/China trade war and geopolitical risks are uppermost among fund managers' concerns in 2019, a survey by the Investment Management Association of Singapore (IMAS) has found.

The survey of 53 respondents from 42 member firms was conducted last December.

Trade wars were cited by 68 per cent of respondents as a top concern, followed by rising political risks and security tensions (49 per cent), and rising uncertainty in US policymaking (42 per cent).

Nicholas Hadow, IMAS chairman said it is no surprise that worries over a trade war are uppermost in the minds of fund managers. "We're not out of the woods by any means, and given the impact this has had on markets so far, fund managers will be looking to see how this will develop further...''

In terms of business, margin compression due to competition and rising regulatory costs are expected to impact the industry's growth.

The pressure on fees is understood to be particularly acute in the institutional space, but even retail fees are under pressure. On the retail channel, Mr Hadow said: "The distribution channel is where the money or fat is, and where there is enormous pressure coming to bear.''

In terms of strategy, absolute return, ESG (environment, social, governance) investments and private markets are expected to rise in popularity. Adoption of ESG investments was cited by 47 per cent of respondents as a future driver of investment growth. Said Mr Hadow: "Anyone who says we don't pay attention to ESG is not going to get the business anymore.''

More than half the managers (53 per cent) expect the threat of a global economic slowdown to have the greatest impact on their business in the next 12 months. New distribution channels (45 per cent) and rising regulatory compliance costs (43 per cent) are also seen as dampeners.

The top driver of investment growth over the next three years is expected to be clients' demand for innovative products (58 per cent). Another driver is the use of fintech in distribution channels.

Mr Hadow said: "Even though the market is increasingly competitive, new technologies will continue to be a key driver of growth. As an industry we're working to identify problems that could be fixed by fintech solutions.'' IMAS represents over 100 firms with assets under management of about S$800 billion.