Financial Services

Global Challenges in Asset Management

December 01, 2014

Asia

December 01, 2014

Asia
Kevin Plumberg

Contributor

Kevin was a member of The Economist Intelligence Unit’s Thought Leadership team in North America and is based in San Francisco. From 2014-2017, he was based in The Economist’s Singapore office and led multi-year integrated content programmes such as Growth Crossings, a series about the new rules of global trade, and the Producers of Tomorrow, an initiative about the future of manufacturing. Prior to joining the EIU, he spent two years as Vice President, Institutional Marketing at BlackRock, the world’s largest asset management company. In that role, he produced and edited white papers, website articles and newsletters aimed at some of Asia’s biggest institutional investors. Kevin also spent 10 years as a journalist covering financial markets, economics and policy for Reuters in Singapore, Hong Kong and New York. As a correspondent and editor, he covered the global financial crisis from Wall Street and its aftermath in Asia, where he led market-moving coverage of the region’s economic policymakers.

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As investors become accustomed to slower growth across emerging markets, investment strategies are evolving.

The report, Global challenges in asset management: Emerging markets shift gears, sponsored by Malaysia’s Islamic Finance Marketplace, is based on . It finds that asset managers are deploying both passive and active investment strategies and differentiating between emerging markets in search of higher risk-adjusted returns.

In an exclusive interview with the EIU, Mark Mobius, executive chairman, Templeton Emerging Markets Group, said that he is currently focused on opportunities in China, India and frontier markets. He cautioned against using exchange-traded funds (ETFs) to access opportunities in frontier markets, because it will be difficult for them to replicate an underlying index without causing an unwanted market impact. “Going into frontiers with ETFs would be a dicey and risky adventure,” Mr Mobius said.

Investors are moving away from blanket strategies that treat emerging markets as a single bloc, the report says. For instance, more investors are investing in emerging markets using single-country ETFs, and looking more closely at which developing markets are more susceptible to changes in monetary policies in advanced economies.

Local currency bond markets suffered last year on fears of Federal Reserve tapering, but they have seen a turnaround in 2014. Their resilience has been generally seen by fund managers as a sign of the market’s growing maturity, though local debt markets have areas in need of improvement. “There are aspects of these markets that have to be developed further, in terms of risk management tools, the interest rate swap market, the currency swap markets,” said Ahmad Najib Nazlan, executive director, Amundi Islamic Malaysia. 

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