Future growth in wealth markets will be driven by strong performances in the Asia Pacific, with frontier markets within the region set to outperform mature and emerging markets, according to a report by GlobalData.
The Global Wealth Market in 2017 report, which analyses the current dynamics of 71 wealth markets, found that the Asia Pacific will experience the highest growth of any region from 2017-21.
Global growth rates are forecast to slow down, falling from a compound annual growth rate (CAGR) of seven per cent from 2012-16 to just above five per cent from 2017-21. The report predicts that slow performance in Europe will contribute to this decline, while the Asia Pacific will continue to grow at a CAGR of eight per cent.
Giants such as China and India will help drive growth in the region, according to GlobalData wealth management analyst, Silvana Amparbeng.
“China is second only to the US in the global wealth market rankings and is forecast to maintain this position up to 2021. Meanwhile India is expected to surpass France by 2021, reaching eighth position,” she said.
Within the Asia Pacific, the strongest performing markets will be frontier economies. Frontier markets such as Mongolia and Kazakhstan lead emerging and mature markets in forecast CAGR for 2017-21, both in nominal and real terms.
Investors need to be wary of inflation in the region though, with GlobalData predicting that it will erode a large portion of the growth of frontier economies. Amparbeng warns that wealth managers need to be careful of this when considering expansion into these markets.
“Despite being the fastest-growing they are still small in terms of aggregate assets. Moreover, stark wealth distribution inequalities and other local economic factors reduce wealth managers’ opportunities further,” she said.
Although still developing, it may be difficult for wealth managers to break into what is already a competitive market. Most clients in the Asia Pacific already work with at least two wealth managers, according to GlobalData.
“Providers planning to expand their assets under management in the region will have to come up with strong and innovative client acquisition strategies,” Amparbeng said.
FE Analytics data puts the annualised three year performance of the MSCI Frontier Markets 100 TR, which is the benchmark for frontier markets worldwide, at 4.95. The current one year performance is particularly strong, at 25.99.
The Fidelity Asia, T. Rowe Price Asia Ex Japan and T. Rowe Price Global Equity funds all have exposure to the Asian Pacific frontier markets.
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