The number of high net-worth individuals in Southeast Asia has been increasing in recent years. These rising fortunes are mainly due to the increasing business and trade opportunities available. One business sector that got a boost from this phenomenon is the wealth management companies.
Revenues are expected to double in the next five years as more money is injected from mainland China for investments. Many asset management companies have turned to China as it is seen as the center for growth in the industry.
According to a report by consulting firm McKinsey & Co., asset managers earned revenues up to US$66 billion last year. If the trend follows, the number is expected to reach US$112 billion over the next five years. China also has the best performing and the fastest-growing asset management industry as 45 percent of the global inflows were realized here. Moreover, the country has also experienced a surge of 11 percent on a yearly basis resulting in assets worth US$16 trillion, under asset management in Asia.
A senior advisor at McKinsey also mentioned that the boom the industry was experiencing is real growth and is coming from new untapped asset pools. This is an incredible opportunity for the asset management companies to explore the many new options available to them. These are the driving forces that are taking the industry to new heights.
There is an opportunity for wealth managers in China as the majority of assets are not managed through asset management companies. Majority of the assets are either unmanaged as assets in bank accounts by wealthy individuals or retail investors. The rest of the assets are managed through institutions like insurance companies, mutual and pension funds, and other investment companies. The unmanaged wealth amounts to as much as 87 percent in China, 60 percent in the United States and about 70 percent in Europe. These high figures reveal the untouched gaps in the Chinese market.
China is a large and a wealthy country. With time, the wealth is flowing out of the shell. The asset management industry of Asia has been mainly driven by the advancements and investments from the Mainland China. The growing number of assets is encouraging further investors to become a part of asset management industry. McKinsey estimates another US$6 trillion will be added in the pool for investment opportunities.
China has also opened doors for the overseas investors, giving them the additional boost. Since the industry is relatively new and has potential, investors are seizing this opportunity. China also introduced the option of majority ownership in joint ventures and foreign entity licenses, which has resulted in a positive reaction from investors all around the world.
China seems to be moving in the right direction and if asset management companies can continue to expand their services, it will be a hotspot for investments.
Key words: Asset Management
Secondary Keyword: China