Asset management in emerging markets - Roland Berger Strategy ...

contentAsset ManagementPROJECTED GROWTH OF THEGLOBAL MIDDLE CLASS2030: 4.92020: 3.22012: 1.8Source : OECDbillionbillionbillion79%69%49%Growing share of middle classin emerging marketsASSET MANAGEMENT IN EMERGING MARKETSEmerging markets around the world are showing themselves to be more than simplyinvestment opportunities for asset managers. With global inflows on the rise, asset managersare turning to emerging markets to tap distribution and sales options and to sourcenew money. The doors for asset managers are opening not just in BRIC countries and theNext Eleven, but also in regions like the Middle East with their impressive growth rates.Double-digit growth is within reach for asset managers in South America, the Middle East,and even in parts of Asia Pacific. But there’s more to market entry than just macroeconomicpotential. Expanding into an emerging market, especially, requires close attention tothat market and its development path, and success depends on approaches and positioningthat are tailored accordingly. It is the fact that these markets are in such flux thatnecessitate substantially robust strategies.A number of qualitative considerations should be factored into an asset manager’s marketentry assessment, the level of basic banking penetration being one of them. The extent towhich a population is already served by financing and investment products is material tothe reach of the entry strategy. Another is the level of investor education, how muchknow-how investors in that market have on their own and other financial markets, andhow sophisticated potential clients are. It is also important to look at the extent of thefinancial market’s liberalization and stability; for example, can asset managers there readilyassess local stock changes, or are there investment restrictions or legal risks to consider?Asset managers should also look for patterns in international outgoing and incomingfinancial flows to determine whether investors are currently allocating money to or withdrawingfunds from the country or region in question. The region’s interest to foreignasset management, the ease of foreign entry, and whether local regulation fosters orhampers new business are also important considerations.TARGETED SEGMENTS, TAILORED STRATEGIESEven more than in an asset manager's home market, success in emerging economiesmeans aligning distribution channels and product offerings with the targeted segments –particularly given the lack of proprietary distribution channels for foreign entrants. Inother words, success entails having a specific "go-to-market" approach. To build such anapproach, players must first assess their current positioning and move to close any gapsin their business models through organic development or strategic partnerships.Emerging markets:Significant growth opportunityfor asset managersAfricaSouth AmericaMiddle EastAPACCompound annual growth rate, 2006 - 2010Source: Roland BergerThe Global Middle Class WILL GROW160%by more thanin the next 25 yearsFor asset managers, tapping into an emerging region or country first and foremost meansisolating the most attractive and approachable client segments. The distribution strategyand product offering can then be aligned accordingly, tailored to segment particularities.While wealthy clients may expect individual coverage and customized solutions, middleand lower segments may respond better to a strong product-push strategy that usesstandardized products.Recent European reports indicate that the top asset managers have incurred more netasset inflows in their top ten funds than in the rest of their portfolios combined. Trends inEurope, in players like Franklin Templeton and Allianz Global Investors, will resonate inemerging regions as well. Independent Financial Advisers (IFAs), for example, will want to