While the majority of today’s millionaires live in North America, the fastest growth is occurring in international markets. According to a 2019 study by Boston Consulting Group, revenue in Asia’s private banking sector alone could equal or exceed that of Western Europe by 2023.
Jennifer Hoopes, Senior Managing Director and General Counsel at Foreside, pointed to this study during a session on the future of the global investment market at Nicsa’s recent SLF. Hoopes moderated the panel, which also featured experts from ALFI, Allfunds, Matthews Asia, and Wisdom Tree.
“With the vast majority of growth in millionaires across the globe in Asia, Africa, and Latin America, we need to be considering opportunities in a radically changing global economy,” she said.
Laura Gonzalez, Head of Iberia & Americas at Allfunds discussed trends and opportunities for managers in Latin America, particularly in light of Brazil’s recent interest rate cuts.
“Brazil has been sleeping giant — a $1.3 trillion market is quite massive from an asset management standpoint,” Gonzalez said. “As of the last quarter of 2019, we have started to see institutional flows. Finally, pension funds in Brazil are targeting fund managers overseas. I wouldn’t say it’s an open market, but things are slowly progressing.”
Jonathan Schuman, Head of Global Business Development at Matthews Asia, said the near-term impact of COVID-19 on productivity for firms with businesses in Asia has been pronounced.
“Many of us at our firm lived in Asia during the SARS and bird flu crises of the 2000s, and the near-term impact, not just on public health but on economic activity and corporate earnings, can be quite acute,” Schuman said. “But if history is any guide, when the public health crisis is under control, the recoveries in Asian economies also tend to be fairly swift.”
Having said that, Asia continues to be fragmented in terms of distribution and regulation, so Schuman said it’s important to choose markets wisely. ”Fortunately, the region has several large markets, which can serve as the anchor of an expansion strategy, without requiring a sprawling local presence. Those include Japan, China, and Australia.”
Camille Thommes, Director General at ALFI, pointed to three general trends in the European market:
1) Environmental, social, and corporate governance (ESGs). “It’s no longer hype,” Thommes said. “At least in Europe, there’s a strong regulatory and political will — a European green deal — to channel firms and private money into sustainable economic activities.”
2) Venture capital fundraising. “If I just look at our jurisdiction, we had a growth rate of an average of 20 percent from one year to another.”
3) Investment strategies. “As has been the case in the U.S. for a very long time, passive has been extremely popular in Europe over the past couple of years, be it passive ETFs, active ETFs, or smart betas,” he said.
Ryan Louvar, General Counsel, Wisdom Tree, said he sees opportunities in multiple jurisdictions when it comes to ETF offerings.
“We see worldwide growth from about $1 trillion in worldwide ETFs about 10 years ago to over $6 trillion today,” Louvar said. “If there’s a bright spot for active, the active ETF market was about $5 billion 10 years ago, while today it’s over $150 billion in active ETFs globally, so there is growth there, including fixed income.”
Note: Although the observations contained in this work represent the best thoughts of the individuals comprising the Nicsa panel, they do not necessarily reflect the views of Nicsa or any of its member organizations. Matters addressed in this work may touch upon legal or regulatory matters, however nothing herein is intended to be or should be construed as legal advice. You should contact your own counsel in order to obtain legal advice regarding these or any other matters.