Singapore fund managers stay bullish on Asia
Fund managers based in Singapore expect increased geopolitical risk to affect financial markets this year but are bullish on Asian stocks and bonds, according to a survey published on Tuesday.
In a survey conducted by the Investment Management Association of Singapore in November and December, 85% of respondents said they expected increased geopolitical risk and market volatility in 2026, while 97% predicted the US Federal Reserve would cut rates further and 52% said global inflation would rise.
IMAS surveyed members from 63 asset management companies with a combined US$35trn in assets under management.
“The survey results demonstrate that fund managers are successfully adapting to sustained uncertainty, identifying high-conviction opportunities in Asia even as geopolitical risks escalate,” said Jenny Sofian, chairman of IMAS.
Most respondents said they expected Asian and US stocks to gain, with 72% predicting the MSCI Asia ex-Japan index to strengthen, and 73%, 52% and 52% expecting rises in the MSCI China Index, S&P 500 and FTSE Straits Times Index, respectively. China and Japan were equal top picks to be the best-performing markets for this year, while Thailand and Malaysia were the most popular guesses to be this year’s worst-performing markets.
“73% of respondents believe that the AI bubble, if there is one, will not burst in 2026,” said Thomas Kaegi, chairman of the IMAS development committee.
While 64% of respondents expected an increase in default risk among Asian corporate credits in 2026, 34% also expected the JP Morgan Asia Credit Index yield to decline by 50bp–100bp from the current level of around 5.32%.
In terms of the development of the fund industry, the biggest threats were perceived to be accelerated flows to passive funds, further margin erosion and the possibility that market performance in 2026 will not match last year’s strong returns.
Within Asia ex-Japan, retail inflows into passive strategies outweighed inflows into active strategies by two to one last year, said Kaegi. In Singapore, the opposite trend was seen, with a 7:1 split in favour of active strategies. Kaegi said the switch to passive strategies has been seen in markets like Japan and Australia in recent years. “We would expect to see that in South-East Asia as well,” he said.
“That means there is pressure on managers of active strategies to either increase performance or reduce fees.”
AI could play a role in that, with 54% of respondents saying that increased adoption of the technology would have the biggest impact on their business within the next 12 months. Just over half of respondents said they had deployed AI in their investment processes and to help in functions like compliance and human resources.
“Adoption tends to be mainly to address productivity and the cost-efficiency side,” said Sofian.
The factors voted second and third most significant were the rise of alternative investments, as well as increasing regulatory obligations and rising operational costs.
Respondents said that income and absolute return strategies were expected to be the most popular investment strategies this year, followed by exchange-traded funds. More than half said they would try to differentiate their business with new asset classes, such as private markets or digital assets.
“The industry continues to see significant margin pressure, and most players are either boutique and trying to be extremely focused or trying to scale,” said Kaegi.
Environmental, sustainable and governance investment aspects have become mainstream rather than an angle for competitive differentiation, according to the survey respondents, with 54% saying that they would focus on integrating ESG into their existing strategies.