Foreign asset managers looking to gain entry into the mutual fund space in Asia via the joint venture route cannot ignore the value of local expertise in their entry strategies, according to a report by Cerulli Associates.
The inaugural Asian Business Strategies report finds that the most successful foreign-local joint ventures in China, India and Korea mostly hire local people, with foreigners kept to a minimum, especially in key positions.
The hiring of locals means that the joint ventures can be run in a similar fashion to wholly local counterparts, which is important if a foreign asset manager is new to an Asian jurisdiction.
"This gives the foreign asset manager the ability to leverage its local partner's distribution network and local knowledge," says Yoon Ng, Asia research director at Cerulli.
The report also notes that joint ventures where the foreign partner has little involvement in day-to-day operations (defined by Cerulli as those with a foreign stake of 34 per cent or less) had more assets under management on average compared to joint ventures in which the foreign partner was active – RMB49.8 billion (USD1.8 billion) on average against RMB21.9 billion.
These findings are important considerations for asset managers who are eyeing Asia, as Cerulli expects further consolidation in the region's fund management industry, especially in markets where an onshore presence is necessary.
"This is likely to lead to more merger and acquisition activity as well as the establishment of more foreign-local joint ventures in the different Asian jurisdictions," adds Ng.
The region represents a bright spot in global fund management. Cerulli forecasts that Asia ex-Japan mutual fund assets will grow from USD1.34 trillion at the end of 2013 to USD2.27 trillion in 2018, with growth fuelled by the Philippines, Indonesia, Malaysia, and China.