Adapting to changing regulatory environment viewed as biggest challenge

Singapore – Growth in wealth management industry revenues in Asia is expected to soften significantly over the next two years, according to a Barclays Capital survey of Asia’s leading wealth managers who between them have over US$5 trillion of assets under management.

Barclays Capital conducted its Wealth Management survey prior to its fourth annual Wealth Management Conference in Asia, held in Singapore on 17 April. This year’s survey involved 123 respondents from 53 key wealth management organisations in seven countries across non-Japan Asia including asset managers, insurance companies, local and global retail banks and private banks.

Revenue Growth to Soften

In last year’s survey, around 90% of wealth managers expected revenue growth in Asia of over 5% p.a. in the coming two years compared with only 41% of respondents in this year’s survey, while 18% anticipate negative returns.

China and India continue to be viewed as the most attractive markets in Asia, both in terms of potential for business expansion and expected revenue growth rate. A majority of wealth managers view China as the most attractive market with a quarter still forecasting revenue growth there of over 15% p.a. over the next two years, compared with a fifth of respondents in the case of India followed by 12% of wealth managers for third-placed Southeast Asia, which includes Singapore.

Korea was viewed as the least attractive market in Asia, with 29% of wealth managers forecasting negative revenue growth.

Industry Trends

The key challenge facing wealth managers is now viewed as being how to adapt to the changing regulatory environment, while being able to differentiate from competitors - last year’s greatest challenge – has dropped down to 5th place.

“It is evident that wealth managers share the view that the financial markets will operate under significantly different regulatory conditions in future,” said Kevin Burke, Head of Distribution, Asia Pacific at Barclays Capital. “Despite this and other challenges facing the industry, it is encouraging to see that around 40% of the region’s leading wealth managers anticipate very respectable growth in their non-Japan Asia revenues over the next two years,” he added.

Product innovation remains a key challenge for the industry, exacerbated by an overriding trend for clients to seek simpler and more transparent products.

Investment Strategies and Product Features

Capital protection continues to be the most common product strategy. Thematic investments dropped from 2nd most popular product strategy last year to 6th this year, reinforcing the continuing client trend towards simple and transparent products.

The three most important product features for clients are considered to be issuer risk, capital protection and short maturity. This is a significant shift in investor attitude away from liquidity and growth, which had typically been dominant over the past 3 years.

“Evidently risk aversion is currently top of mind for investors, as demonstrated by the great importance they place on protecting their underlying capital, assessing issuer risk and short maturity products for investment flexibility,” said Peter Hu, Head of Non Japan Asia Investor Solutions at Barclays Capital. “This risk aversion is also reinforced by a shift towards increased use of structured deposits,” he added.

Wealth managers’ recommendations for a balanced-risk investor portfolio have an increased weighting in cash products and bonds over last year’s survey, at the expense of equities and commodities, which is in line with the trend towards capital protection. Looking ahead, a majority of respondents are expecting the allocation to non-Japan Asia equity within their balanced-risk portfolio to increase over the next 6 months.

Asset Classes

The survey also showed that equity and FX remain the most popular asset classes for both flow and structured products. The use of equity has generally declined from last year as investors search for capital protection, and the use of structured products has declined across the board as investors search for simpler and more transparent products.

Commenting on the survey Peter Hu said, “The Barclays Asia Wealth Management Survey has gained real momentum with significantly more respondents every year, despite the market turmoil. I believe that this is testament to the credentials of the survey itself, as well as our commitment to servicing the wealth management industry in the region.”

Ends

For further information, please contact:

Jonathan Williams
Corporate Communications, Barclays Capital, Asia
+65 6308 3490
jonathan.williams@barcap.com

Notes to editors:

About Barclays Capital
Barclays Capital is the investment banking division of Barclays Bank PLC. With a distinctive business model, Barclays Capital provides large corporate, government and institutional clients with a full spectrum of solutions to their strategic advisory, financing and risk management needs. Barclays Capital has offices around the world, employs 20,000 people and has the global reach, advisory services and distribution power to meet the needs of issuers and investors worldwide.
For further information about Barclays Capital, please visit our website www.barclayscapital.com.

Barclays Capital’s structured products and derivatives credentials
Barclays Capital is a recognised leader in structured products and derivatives. In Asia Pacific, the firm has recently won the following awards for structured products and derivatives:

FinanceAsia’s Structured Products Awards:

• Best FX House in 2009
• Best Commodities Structured Product: CORALS in 2009
• FX and Commodities House of the Year 2008

AsiaRisk Annual Awards

• Currency Derivatives House of the Year 2006 & 2008

The Asset Asian Awards

• Best Structured Products House: Retail 2008
• Best Commodities Structured Product: Global Commodities Delta Fund in 2008.

Structured Products magazine Awards:

• Structured Products House of the Year Asia 2007