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Turbo-charging asset management in Singapore
MACRO sociopolitical and economic risks have tended to be topics du jour for the asset-management industry over the past couple of years, but that is beginning to change.
New technologies, digitalisation and investor preferences for other asset classes are now spurring new, opportunity-driven conversations around improved productivity, reduced costs and increased alpha.
The drive to transform mindsets, how funds are managed and how asset managers engage with their clients will no doubt be reflected when 300 managers gather here next month for an investment conference organised by Investment Management Association of Singapore (IMAS) and Bloomberg.
Singapore's status as a key centre for asset managers has been cemented in recent years. Assets under management (AUM) in Singapore grew 19 per cent in 2017 to S$3.3 trillion. That growth was broad-based across traditional and alternative assets and part of a wider trend in the Asia-Pacific.
PwC estimates that AUM in the Asia-Pacific will grow faster than any other region globally, up from US$15.1 trillion in 2017 to US$29.6 trillion in 2025.
Dig a little deeper and you will recognise that Singapore is also a hub for wider-reaching asset management activity in the region. In 2017, 78 per cent of AUM in Singapore was sourced from beyond its shores; 67 per cent of total AUM from Singapore was invested in the Asia-Pacific and 39 per cent in Asean countries.
Two opportunities stand out in particular for asset managers: The first is in harnessing data and new technologies to drive customer engagement and operational efficiency.
A relative laggard in tapping technology advances, the asset management industry is, for example, ranked 24th among 34 industries in digitalisation, said Boston Consulting Group (BCG) and Morgan Stanley, indicating headroom for greater efficiencies and differentiation for early tech adopters who get it right.
Companies like Bloomberg recognise that big data, machine-learning and natural language-processing are converging and changing the way investors derive, consume and analyse information.
Data to the fore
Regardless of size or expansion goals, a next-generation asset manager's technology strategy should revolve around data. Developing a sustainable and achievable Target Operating Model is the best first step for firms to shape and direct their technology and data transformations.
For example, better consistency and more timely access to data enables the front office to seize investment opportunities. Automating and streamlining the flow of compliance data through technology can reduce human error to meet the industry's increasingly rigorous regulatory standards.
The Singapore authorities are also doing their part to encourage innovation. In November 2017, the Monetary Authority of Singapore (MAS) introduced a S$27 million Artificial Intelligence and Data Analytics (AIDA) Grant under the Financial Sector Technology & Innovation (FSTI) scheme to promote the adoption and integration of artificial intelligence and data analytics in financial institutions.
IMAS also helps to spur faster commercialisation of digital solutions for the industry, recently calling for applications for its fintech accelerator and mentorship programme - the first association-led initiative for asset management in Asia. Finalists will showcase their solutions to problem statements ranging from predicting and managing regulatory obligations to alternative data models to develop signals for alpha generation.
The second growth opportunity is the rise of sustainable investing. Driven by changing investor preferences and a shift towards investing in purpose-driven assets, sustainable investing has had turbo-charged growth in other parts of the world, a trend that can no longer be ignored in Asia.
Assets managed under responsible investment strategies in Asia excluding Japan remained very low at 0.8 per cent of total AUM, compared to Europe, where environmental, social and governance (ESG) investing accounted for 53 per cent of total AUM in 2016, said the Global Sustainable Investment Alliance.
Responsible investing is slowly but surely gaining popularity in Asia, fuelled by a new generation of serious "millennial investors" and supported by initiatives such as Singapore's Stewardship Code and SGX's mandated sustainability reporting from listed companies.
As interest in ESG investments in this region rises, Singapore asset managers can lead by meeting this demand, making sustainable investing a core part of investor portfolios.
Wealth in Asia
Opportunities abound for the asset management sector as Asia is set to have the world's highest concentration of wealth. Singapore, in particular, will continue to play a key role if it seizes these two opportunities. Greater efficiencies and innovation, coupled with new areas of investment to meet changing investor preferences and a continued inflow of funds to this region should auger well for the asset management industry, and, we hope, a glass-half-full vibe at the upcoming IMAS-Bloomberg meeting.
- The writer is head of Asean at Bloomberg. The inaugural IMAS-Bloomberg Investment Conference on May 9 will bring together Asia's asset managers and global thought leaders to discuss the future of asset management.