Asset managers in Southeast Asia are operating with all-time high costs, according to an industry outlook by EY which recommends adapting via outsourcing, tech and other solutions.
According to EY's Mriganko Mukherjee, asset managers in Southeast Asia will be focusing on costs in 2024 which are at an «all-time high».
«That goes for the cost of front, mid and back-offices, as well as for the cost of compliance and operations,» said Mukherjee, the firm’s ASEAN wealth & asset management leader, in a note.
«As fund firms consider their 2024 investments, they should explore near-shoring and off-shoring of back and mid-office functions, with India, Malaysia, Vietnam as potential locations.»
Tech Deployment
In addition, Mukherjee noted that there will be an increased focus on technology and artificial intelligence next year in a sector that is relatively lagging.
«[This] is mainly used to supplement human effort and interaction, so it should also be a priority in the year ahead,» he explained. «The risk of cyber incidents is higher and will be a focus area as well in 2024.»
Top Line Challenges
Costs aside, asset managers in Southeast Asia will have to grapple with deal-making challenges in the midst of a continued high interest rate environment.
«Fund-raising for Asia/ASEAN will be difficult for first-time asset managers, as they need to show a track record of exiting and returning capital successfully, particularly in this type of environment that is complicated by geopolitical tensions and macroeconomic uncertainties,» Mukherjee said.
Nonetheless, it is not all bad news as there are areas of optimism in 2024. This includes a focus on credit plays for all asset classes, including corporate, real estate and consumer. ASEAN asset managers will also benefit from the continued growth in wealth and family offices, particularly in Singapore where it will allow single family offices to use variable capital companies (VCC) as an evergreen investment vehicle.
