Optimising Sales in Asia

Optimising Sales in Asia

June 2015

Table of Contents

Street vendor cart with jars



When making critical business decisions, the formulation and execution of strategy must be informed by a firm grip of cold, hard facts – especially in times of unprecedented change and uncertainty. To help inform executives within global asset management firms and better address their key business challenges, BNY Mellon is launching a series of strategic reports which are firmly rooted in independent, evidence-based analysis.

The question of maximising fund sales in Asia is a prominent one for asset managers looking to optimise their opportunities beyond established home markets. As such we’re launching this new series with a study that focuses on the relative importance of price, product and performance in growing market share, using a ground-breaking methodology to investigate a substantial database. I’d like to take this opportunity to commend Oxford Metrica, a specialist UK-based advisory firm, not only for creating a framework for analysing drivers of fund sales in key Asian markets, but also for providing a basis for delivering data-driven analyses of a wide range of key themes and topics of strategic significance to asset managers.

BNY Mellon is delighted to be working with Oxford Metrica to present this study. We hope you can use this study as a valuable input into your Asian strategy, whether ramping up your existing presence or identifying first steps into the region. Moreover, we look forward to sharing future insights and findings with our global client base, and working with you to execute on the strategies you develop, based on a keen understanding of market realities and dynamics, and of the tools and processes required to deliver success.

Daron Pearce Signature

Daron Pearce Global Head, Investment Managers Segment BNY Mellon Asset Servicing


Executive Summary: Go Local, Very Local


Sales success in Asia’s major cross-border funds markets requires a deep understanding of the different factors that inform retail and institutional demand. Singapore, Hong Kong, Taiwan and South Korea are the focus of this report as markets where the European UCITS structure is accepted and therefore accessible entry points for non-Asian investment managers seeking to sell existing UCITS funds into Asia.

As one might expect, retail investors are generally more price sensitive than institutional investors, and performance counts to a greater or lesser extent in most markets. But the interplay between price, product range and performance is finely balanced across all markets analysed and, as such, close attention to the realities of individual markets is required by fund promoters. Moreover, there exist clear and measurable differences between Asian markets, between distribution channels within markets, and between asset classes.

These broad ‘headline’ observations – plus those below and the more detailed findings within the body of this report – are derived from a landmark study of Asia’s key cross-border markets, based upon a robust and innovative quantitative analysis of fund sales data on an unprecedented scale. To produce meaningful insights for asset managers active in the Asian market, BNY Mellon has partnered with Oxford Metrica to develop a statistical framework for analysing the role of price, product range and performance in the purchasing decisions of institutional and retail investors, which draws upon a comprehensive fund portfolio, provided by Lipper, a Thomson Reuters company, a leading provider of mutual fund data.

In response to the question, ‘What drives sales in Asia – price, product range or performance?’, the BNY Mellon/Oxford Metrica methodology yields the following key results:

Price Sensitivity: Not just a retail issue

  1. Strong sensitivity to price is demonstrated by cross-border retail investors in Singapore, Hong Kong and South Korea, but not in Taiwan, where the retail market exhibits higher fund prices, on average, than either Singapore or Hong Kong.
  2. South Korean institutional investors enjoy the lowest fund prices across the four markets, in parallel with regulatory changes to attract inflows of international assets. In contrast, South Korea has the highest retail fund prices, reflecting more agents in the sales process and restricted supply of funds.

Product Range: One-stop shop or specialist expertise?

  1. Hong Kong retail investors exhibit a preference for product range: a one-stop shop that can provide funds suitable through different market cycles. Although Hong Kong’s retail market is characterised by less product diversity than its institutional fund market, institutions generally favour expertise from niche providers.
  2. Retail investors in Taiwan and, to a lesser extent, South Korea, appear to prefer narrow product focus (i.e. funds offered by specialist providers), but the retail market in Taiwan offers greater product diversity than is offered to retail investors in Hong Kong.

Performance Impact: Beating the benchmarks

  1. Cumulative returns over 1-year, 3-year and 5-year time periods are shown to be a strong driver of sales for retail investors across all four markets, with the relationship between sales and performance for institutional investors stronger over the longer time periods.
  2. For institutional and retail investors in Singapore and Taiwan (and, to a lesser extent, South Korea), there is some evidence of a fund’s relative performance to the index being an important component of the purchase decision. Outperforming the benchmark index does not appear to be as strong a driver for Hong Kong investors for whom brand security perhaps holds greater weight.

This paper should be used by current and prospective players in the Asian cross-border fund market to provide an initial insight into investor preferences when reviewing marketing and strategic priorities.

As well as providing detailed quantitative analysis of the role of price, product range and performance on fund sales in four key cross-border fund markets, the report also uses interviews with BNY Mellon clients, and expertise from BNY Mellon Regional Executives, to provide supporting qualitative commentary on the market trends and developments. This will help readers understand the distinct domestic context within which fund purchase decisions are made.

BNY Mellon will use the methodology on which this report is based in further studies with the aim of helping clients in the asset management sector to make strategic decisions based on statistical insight and market intelligence.

A Note on Methodology


The methodology devised by Oxford Metrica to provide the quantitative analysis in this BNY Mellon report was initially constructed to provide a framework to investigate statistically a range of themes and topics relevant to the fund management industry. It was then tailored more specifically, with Oxford Metrica building a substantial database populated by raw data sourced from Lipper, a Thomson Reuters company, covering 4,358 funds with a total net asset value of USD958 billion over the five-year period (2010-2014).

The database includes static data, reflecting the composition of the current cross-border fund market for five Asian jurisdictions (those listed above, plus Japan) by channel, domicile, asset class, cost and currency, as well as data on total net assets and performance to enable the identification of emerging trends over a five-year period.

Extensive quantitative analysis of the full universe of funds was undertaken (no sampling) and subjected to robust modelling procedures. Three broad stages of analysis were undertaken:

  • Defining the relevant portfolio of funds to be studied and identify where each fund is registered for sale – Whilst it is relatively straightforward to identify domestic funds for each country, this study focuses on cross-border funds which tend to be registered in multiple countries, and classified typically as ‘international’.
  • Devising a quantitative metric of product range – This metric had to combine the number of asset classes offered by a company with the distribution of assets across those classes to capture spread accurately.
  • Creating a model to estimate the correlation coefficients between sales, and price, product range and performance, and establish whether any significant relationships exist.

This methodology produced independent, evidence-based analysis of the fund purchase decision of use to fund managers seeking to enter Asia or expand sales in the region, as well as a basis for further analysis of other regions and/or themes. See [Data and Methods] for more detail on methodology.

Street vendor selling meat

The Fund Landscape: Much in Common, But Many Differences Remain


Fund markets in Asia are extremely diverse and are growing rapidly. Regulation across the region is highly fragmented, cultural differences abound and investor preferences vary widely.

Even for mature, open markets such as the four markets featured in this report, such a richly contrasting landscape requires carefully tailored distribution strategies. READ MORE

The importance of localisation

Interviews conducted to accompany this study reveal a strong belief in deep market knowledge, local presence, where possible leveraging existing resources and partnerships. In terms of entry strategy, interviewees generally favoured a gradual build out across the region, typically ensuring that the agreed approach was working well in a small number of markets before committing further. READ MORE

What Drives Sales in Asia – Price, Product or Performance?


The diverse characteristics of the four markets analysed – as outlined in the section above – demanded that our analysis of the relationship between a fund’s net inflows and its price, performance, and product range be conducted for each market distinctly, and for each distribution channel (institutional and retail).

Price Sensitivity: Not just a retail issue

Statistical analysis conducted for this report supports received wisdom that retail fund buyers are typically more sensitive to price than institutions, but the picture differs widely across markets. In the retail market, for example, Hong Kong retail investors appear considerably more influenced by price than their counterparts in Taiwan, while an analysis of total expense ratios (TERs) across asset classes reveals interesting differences across both institutional and retail channels in the four markets analysed. READ MORE

Product Range: One-stop shop or specialist expertise?

Our analysis suggests that there is a stronger relationship between product range and sales momentum among retail fund purchasers than their institutional counterparts but, perhaps surprisingly, this relationship is positive and negative in different jurisdictions. READ MORE

Performance Impact: Beating the benchmarks

As all investors know, past performance is no guarantee of future returns. But to what extent does a demonstrable track record support sales growth? In a period of considerable uncertainty and change, our analysis reassuringly provides evidence that Asian fund investors respond to performance, with both retail and institutional markets showing strong correlations to sales. READ MORE

Conclusions: Preconceptions Confirmed or Rebutted?


The purpose of this paper is to provide senior executives at international asset management firms and other fund promoters with greater insight into fund purchase decisions taken by investors in key cross-border fund markets in Asia – Singapore, Hong Kong, Taiwan and South Korea – in order to understand better what drives sales. More specifically, the research aim was to measure the relationship between fund sales, and price, product range and performance for institutional and retail investors in these four markets.

It is clear that investors across these different market segments have very different sensitivities to price, product range and performance. Whilst some results are intuitive and expected, the research seeks also to measure investors’ preferences such that preconceptions may be confirmed or rebutted, and the parameters (of price, product and performance) may be quantified.

  • Singapore – A mature and competitive market, Singapore retail investors are price-sensitive and demand strong fund performance. Institutional investors in Singapore are driven more by longer-term performance, and investors in both distribution channels look to outperform the benchmark index.
  • Hong Kong – Outperforming the benchmark index does not appear to be a core component of the fund purchase decision for investors in Hong Kong; institutional or retail. Despite the retail market in Hong Kong exhibiting a preference for product range that can cater for investors throughout many market cycles, the retail segment reflects less product diversity than its institutional counterpart.
  • Taiwan – A strong sensitivity to price is not apparent across retail investors, allowing fund managers to charge higher TERs than in Singapore or Hong Kong, for example. Retail investors in Taiwan do exhibit a preference for specialist providers, albeit those with the capability to offer funds across many asset classes.
  • South Korea – The Taiwanese preference for a specialist provider is echoed by the South Korean retail fund market. In this market segment, investors face the highest TERs. The supply of funds is restricted and the master-feeder structures add further layers to the distribution process. In contrast, government policy aimed at encouraging foreign inflows to the institutional fund market has resulted in South Korea having the lowest TERs across the four institutional markets analysed.

Asia has long been perceived as a major opportunity for the global fund management industry, but this analysis underpins the great diversity to be found in just these four markets, let alone the rest of the region.

Nevertheless, by providing an evidence-based view of investor preferences across different distribution channels and markets, this research offers initial insights to the fund purchase decision that may serve as a helpful resource for those wishing to maximise the sales opportunity.

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Data and Methods


All data underpinning this study are provided by Lipper, a Thomson Reuters company. The data used for this research covers a five year period ending 30 September 2014.

Three broad stages of analysis were undertaken. First, it was necessary to define the relevant portfolio of funds to be studied and identify where each fund is registered for sale. Second, a metric of product range was devised for each fund promoter such that it could be included in a quantitative model. Finally, a model was designed to estimate the correlation coefficients between sales, and price, product range and performance, and establish whether any significant relationships exist. READ MORE

About Oxford Metrica


Oxford Metrica is a strategic advisory firm, offering informed counsel to boards. Our advisory services are anchored on evidence-based research in risk and financial performance. Our work includes statistical analysis and index construction for banks and insurers, risk and performance analytics for asset managers, due diligence support in mergers and highly customised services for corporate boards.

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