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Peter Hill

Trends in the investment management industry for 2014

BY PETER HILL

In 2013, the finance industry in Asia continued to drive global economic growth, with key markets China and India leading the charge. Moving forward into 2014, Asia Pacific is expected to continue growing as a financial hub with more investment opportunities.

As an expert in investment management systems, we highlighted five key trends to note in the next year.

1. Convergence of traditional and alternative investing

As interest rates are expected to stay low, or even lower in 2014 with markets fully valued, investors will look at alternatives to get higher investment returns. As a result, there will be more diversity into real estate, private equity, commodities, derivatives and other new investment products.

In short, anything non-USD or Euro valued will interest investors to look for different opportunities.

Financial markets will see greater volatility, faster moving transactions and a wider range of opportunities. In order to keep pace with this development, having a single, real-time source of record for risk and performance is an absolute necessity.

2. Increase in investment to meet tighter regulatory requirements

Compliance with regulation will continue to be a key focus area for investment in the next year. With the likes of Dodd-Frank and EMIR sweeping across the US and Europe, financial institutions in Asia will likewise have to ensure that they comply with international standards.

Investor confidence is of paramount importance and clients will demand higher transparency in terms of fees, risks, data report generation etc.

Investment management firms will therefore pay closer attention to implementing strong governance structures and processes. This is critical in ensuring asset managers adhere to legal compliance requirements and improve accountability to investors.

3. China’s growing economy to create more opportunities

Slowly but surely, China has been opening up its markets and granting greater access to global investors. According to the East Asia Pacific Economic Update by the World Bank, East Asia Pacific continues to be the engine driving the global economy, contributing 40 per cent of the world’s GDP growth.

In addition, China’s growth is also projected to be 7.7 per cent in 2014.

Deregulation of access to China’s market means global investors must re-evaluate their portfolios to include this rising power. In November 2012, the China Securities Regulatory Commission and Hong Kong’s Securities and Futures Commission formed a working group to plan the terms of mutual recognition.

The aim of the group was to permit Mainland Chinese firms to sell funds into Hong Kong and vice versa. Once the regulators reach an agreement, it will give international asset managers in Hong Kong a direct route into the fast growing China market.

Another ‘push’ factor in greater investment is the strengthening of the Renminbi (RMB). A stronger RMB will attract even more investment flows to Greater China and ASEAN but less so for India, Japan and Australiasia.

4. Replacing legacy systems to be a priority

With the increase in alternative asset classes, tightened regulatory requirements and the constant chase for growth, an increased number of financial institutions are looking to put investment towards infrastructure and technology updates to support growth, asset class expansion and comply with regulation.

With more than 25% of investment managers operating on legacy technology, investors’ funds are at risk similar to that of the investors at MF Global, which collapsed in part due to inadequate technology.
 

The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Asian Banking & Finance. The author was not remunerated for this article.

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Peter Hill

Peter Hill

Peter Hill is Managing Director of United Kingdom & Middle East at SimCorp Ltd. He joined in February 2006 following a 26-year career in IT management and sales. Prior to joining SimCorp, he was managing director of Fiserv Asia Pacific.

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