Page 60 - CMP3

The asset management industry is anchored by large banks and insurance-backed entities that are dominant in unit trust funds and are often backed by a strong agency workforce. Some market participants have partnerships in their distribution model to enable portfolio-based offerings for their clients, replacing established product-centric sales model. Platform-based fund distributions have also emerged in recent years along with robo-advisors or DIMs. While investors on such digital platforms have grown, for example, account opening on DIMs grew by more than eight times in 202012; this remains a small segment of the overall market.
Within the industry, funds still mainly invest onshore (72% of industry assets), and in traditional asset classes such as equity, fixed income and money markets (89% of industry assets)13. Notwithstanding, growing investor demand for investment diversification has resulted in the growth of foreign funds and funds investing in alternative asset classes. Underpinned by liberalisation measures14, industry assets allocated outside Malaysia have grown by a CAGR of 15.6% between 2012 and 2020, which is close to three times the growth in total assets over the same period15. Meanwhile, allocation to alternative assets such as private securities and unquoted securities have grown by 5.1% CAGR16.
STAYING AHEAD OF THE CURVE
The abovementioned observations of the asset management industry reflect the growing diversity and sophistication among Malaysian investors – from the perspective of financial and investment literacy, advisory needs, investment sophistication, income levels, risk appetite and preferences in investment channels. These emerging need will continue to change on the back of various shifts – domestic demographic changes, Malaysia moving into a high-income nation status17, growing interest in SRI and the continued search for yield. This is further amplified by the advancement of data and technology, which reshapes how insights are derived, decisions are made and services are delivered. Moving forward, Malaysia needs an investment ecosystem that is diversified – one that caters to the different needs of Malaysian individuals and businesses.
As an individual ages, their wealth accumulation or preservation-centric portfolio might require recalibration to enable wealth decumulation for retirement – as outlined in Diagram 7. In the wealth accumulation phase, investors convert income into investment capital. Investments in this phase are growth-focused and emphasise on returns vis-à-vis one’s risk appetite. In contrast, wealth decumulation – a concept that is still nascent in Malaysia – requires investors to convert a portion of their investments into fixed or regular
Moving forward, Malaysia needs an investment ecosystem that is diversified – one that caters to the different needs of Malaysian individuals and businesses.
12 Internal analysis, SC, 2019.
13 Internal analysis, SC, 2020.
14 This includes measures such as feeder fund structures, Mutual Recognition Agreements (MRAs) and ASEAN collective investment
schemes to liberalise access to foreign funds.
15 Internal analysis, SC, 2020.
16 Internal analysis, SC, 2020.
17 Aiming High – Navigating the Next Stage of Malaysia’s Development, World Bank, 2021.
58 SECURITIES COMMISSION MALAYSIA