Singapore asset managers forecast turbulent year for markets
Asset managers in Singapore expect geopolitics to make markets turbulent this year, but have fewer concerns about the outlook for inflation.
According to a survey published on Wednesday by the Investment Management Association of Singapore, 56% of respondents expect an increase in geopolitical conflicts this year.
The survey was conducted shortly after the US election and drew responses from 52 C-suite personnel at fund houses that manage over US$35trn in assets globally.
According to the survey, 54% of respondents were concerned that heightened trade tensions would negatively affect Asian markets, while 23% expected a weaker China would weigh on markets. Only 19% expected Asian markets to perform robustly.
Fears of persistent inflation have eased, with 52% of respondents expecting central banks to achieve a soft landing, though 46% expect global inflation to rise again this year and only 25% expect it to fall. The majority expect the US Federal Reserve to cut rates by a total of 75bp this year.
“Amidst geopolitical uncertainties and shifting market dynamics, firms must adapt their strategies to remain competitive while capitalising on emerging opportunities,” said Jenny Sofian, chairman of IMAS.
Asset managers saw investors' shift to passive funds like exchange-traded funds and a general decline in margins as the biggest threats to their industry, with 63% of respondents highlighting the two as concerns.
“Asian institutional investors for a long period had a bias towards active management and a regional bias, and that is starting to change,” said Trevor Persaud, chairman of the IMAS risk and performance committee. “The case for an Asian bias over the US has eroded. The most effective way to buy into the US if you don’t know what to buy is through an ETF.”
Half of respondents said they were trying to remain competitive by incorporating new asset classes like private credit or digital assets.
The survey found 48% expected an increase in demand for private assets to be a key driver of business. “It’s an area where margins are high,” said Dhananjay Phadnis, a member of the IMAS development committee.
Only 17% of asset managers said that new ESG products would be a top driver of growth, down from 42% in the previous year’s survey. While investor demand for ESG strategies continues to grow, the survey result reflected the fact that many funds have already developed ESG competencies and are moving onto other products.
“Many firms are saying ESG integration into their existing strategies is going to be their core focus,” said Mervyn Tang, co-chairman of the IMAS ESG working group. “If I’m a firm that’s not focusing on launching new ESG funds, I still need to make sure my existing funds conform with my ESG standards.”
He added: “Demand for general ESG funds is decreasing and evolving into different kinds of demand.”
Tang said that even investors without a focus on ESG may be investing in the sector for other reasons. “Clients may be interested in investing in renewables even if they don’t have ESG strategies, just because of the risk-return,” he said.
IMAS members said that the rise of retail-focused investment platforms like Endowus and Syfe is positive for the development of the industry, since they introduce predominantly young people to investment concepts and explain the cost breakdowns.
“FIntechs like Endowus play a huge role in educating this segment,” said Carmen Wee, CEO of IMAS.