Bangkok--Jan 11--Moody's Investors Service
Moody's Investors Service says that the Pacific Rim mutual fund sector is generally optimistic on the industry's outlook. In general, their optimism with respect to interest rates, both local and international, and local stock markets is well placed as both ended the year higher.
At the same time, the industry believes that funds are either riskier or
much riskier than before, while asset management firms and asset managers feel they are operating in a competitive environment and under significant pressure to perform.
The conclusions are part of the results of the first on-line survey conducted by Moody's Global Managed Funds Group on the Pacific Rim mutual fund industry.
A report on the June 2005 survey -- authored by Kathryn Kerle, a Vice
President/Senior Credit Officer based in London, and Henry Shilling, a Senior Vice President based in New York -- has just been released.
"The survey and the subsequent report are both valuable in terms of their results and geographic spread," says Kerle. "Respondents, most of whom
are portfolio managers, are based in major financial centers, including Taiwan, Hong Kong, Singapore and Australia."
"The main focus areas of the study are the outlook for the industry,
changes in the risk and investment profiles of funds, challenges facing both the industry as a whole and fund managers individually, and opportunities for the sector," Kerle says, adding, "Another key area of focus is the development of the money market fund industry in the region."
In view of the difficulties associated with enhancing fund performance in a low interest rate climate, respondents identify the industry's best
opportunities in the area of new products, new customer segments and new
geographic regions.
They also expect the relative importance of money market funds to grow
over the next five years, the report says, adding "the greatest obstacle to growth, in their view, is the absence of suitable securities in which money market funds can invest." That said, most respondents view this as either an insignificant obstacle or no obstacle at all.
The report notes the diversity of the Asian fund management industry.
Established capital markets, large numbers of domestic investors and an appreciable domestic asset management industry, but relatively little international management, characterize some markets, such as Australia and Japan.
On the other hand, Hong Kong and Singapore operate as regional asset
management hubs. Hong Kong focuses on sales and marketing activity, while Singapore concentrates on asset management.
On the issue of riskiness of funds, Kerle notes "the concerns raised by
Asian fund managers mirror those expressed by respondents to two companion surveys of money market fund managers in Europe and the US."
Those Asia Rim respondents who believe that the risk profile of funds had changed recently list various reasons, including the desire for yield,
particularly acute in a low interest rate environment, as a key factor driving the trend.
Others note asset managers are buying riskier assets without necessarily
understanding the risks involved, a trend facilitated by the greater availability of leveraged and structured products.
According to respondents, the competitive nature of the environment
further offers one of the greatest challenges to the firms for which they work: a majority cites this either as a moderate or significant challenge.
For example, strong growth in AUM in Hong Kong and Singapore is being
accompanied by growth in the number of companies providing asset management or advisory services. Growth in AUM in Australia is also strong.
Almost as important a challenge as competition is the pressure to achieve
performance targets, while other significant challenges include differentiating fund offerings from those of competitors, meeting client needs and regulatory issues.
On the profile of the respondents, Moody's says about 76% work for asset
management firms with US$3 billion or less under management. About 44% work for private companies and another 16% for a company-owned bank.
Meanwhile, 64% work for firms serving both the retail and institutional
markets, but 24% at firms serving only the institutional market and 12% at firms serving only the retail market.
A total 56% of respondents are portfolio managers, with another 12%
credit analysts and 12% marketing managers. Geographically, 40% of respondents are located in Taiwan, 28% in Singapore, 20% in Australia and the remainder in Hong Kong. The majority of respondents (61%) work for asset management firms with only one investment center.
The report on the Pacific Rim survey is entitled "Moody's Investors
Service 2005 Survey Results: Pacific Rim Mutual Fund Industry Survey," while that on Europe, "Moody's Investors Service Spring 2005 Survey Results: European Money Market Fund Survey," and that on the US, "Moody's Investors Service Money Market Fund Industry Survey First Quarter 2005 Survey Results."
NOTE TO JOURNALISTS ONLY: For a copy of this report, please contact New
York Press Information +1-212-553-0376; Daniel Piels in London
+44-20-7772-5456; Juan Pablo Soriano in Madrid +34-91-310-1454; Henry
MacNevin in Milan +39-02-58-215-580; Melinda Keating in Sydney +612 9270
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+27-11-217-5471 or visit our web site at www.moodys.com
London
Kathryn Kerle
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
New York
Henry Shilling
Senior Vice President
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653 End.