Asian asset managers saw slowest growth in seven years in 2018, as US-China trade war sapped appetite for investments

Asian asset managers saw their slowest growth in assets under management in seven years in 2018, but growth should remain strong in mainland China as regulatory changes make it easier for foreign firms to set up shop, according to a new report from consulting firm McKinsey & Company.

The region accounted for more than half of all flows globally in the past five years, but only saw a 5 per cent increase in assets under management last year as macroeconomic uncertainties, including a trade war between the world’s two largest economies, weighed on the industry.

Despite the slowdown, profit margins at Asian asset managers remained healthy and significantly outpaced other markets, including North America and western Europe.

“The asset management industry in Asia is changing fast, with disruption the new norm,” said Jacob Dahl, a McKinsey senior partner. “In order to create sustainable value for the future, asset managers need to gain scale through acquisition, attain fee flexibility through solution orientation and enhance productivity through digitisation.”

Emerging Asia showed the strongest growth in assets under management last year, with about 93 per cent of flows coming from mainland China, McKinsey said. Asia, in total, had about US$2 trillion of fund flows in 2017-18, the firm said.

“Mainland China’s market boom has contributed heavily to strong net flows over the past decade, with an average flow effect of around 20 per cent annually,” the firm said. “In addition, recent regulatory changes have given the impetus to foreign firms to explore opportunities to set up shop in the private fund market to serve institutional and accredited investors.”