Foreign Firms Aim To Crack Southeast Asia Fund Market With "Master-Feeder" Route

Tom Burroughes

27 January 2017

More non-domestic fund houses will try to crack Southeast Asia’s fund markets to tap the region’s wealth, using master-feeder structures to succeed because onshore presences can be costly to set up, according to Cerulli Associates, the analytics firm.

The increasing demand for foreign-invested funds across markets such as Malaysia, Thailand, Indonesia, and to a lesser extent, the Philippines, creates a chance for foreign fund houses, the company said in a recent note.

In Malaysia, many foreign fund houses have looked to the wholesale fund structure to launch feeder funds as approvals for retail unit trust feeders have been hard to obtain in recent years, due to differences in investment restrictions and guidelines between Malaysia and other markets, it continued. Wholesale fund assets drove most of the growth in mutual fund assets under management, with a 19.9 per cent increase in assets to MYR101.4 billion from 2015 to end-October.

In Thailand, feeder funds continued to register “decent growth” during the 11 months to end-November, the report said. Fixed-income feeder funds were the key driver, growing 188 per cent to $1.3 billion in November 2016.

The report said that as far as feeder funds are concerned, prominent names such as JP Morgan Asset Management, PIMCO, and Schroders dominate as top choices for master funds, despite not having onshore offices. The three firms have each amassed AuM exceeding $1 billion in Malaysia and Thailand. This is larger than the amount garnered by most domestic firms, and suggests that feeder funds are still the best way to go for a foreign manager to penetrate these markets, the report said.

Domestic fund houses in both Malaysia and Thailand are gradually opening up to work with boutique, less well-known managers and Asia-based firms, the report added.