2019 was nothing short of climactic. Volatility prevailed in global financial markets, with Brexit looming, and economic conflict between the US and China ongoing. Entering 2020, asset managers are under pressure to navigate this uncertainty, as they work to meet the ever-changing needs of clients and achieve business growth. And with the volume of investable assets globally set to exceed $100 trillion in the near future, there will be opportunities, too.
To be successful in this unpredictable environment, it’s important to get the basics right. Client relationships based on trust are the key to success. And while fund houses are continuing to find ways to implement fintech solutions, make acquisitions and hire fresh talent, have they paused to remind themselves that the strength of partnerships with clients is perhaps the most critical?
A key element that influences this trust is insight on developing market trends, as this ultimately feeds into the advice and investment solutions we provide. On the surface for example, there is typically continued demand for core global strategies, like global equities, emerging market equities, multi-asset strategies and global bonds, and then more thematic offerings, such as Technology, AI, India or China. But if you dive deeper, there are some other distinct trends taking off.
In the GCC, retail clients are increasingly interested in products that offer predictable income and stability, given the ongoing volatility that persists in global financial markets. This has led to growth in demand for “buy and hold” products (ones that you buy and hold for a specific period, and that can provide a more predictable return). More recently this preference also grew in Eastern Europe. And from GCC institutional clients, there has been an uptick in demand for alternative investments, including real estate, infrastructure and private equity and debt, as they seek to better diversify portfolios. There is also growing interest in ETFs more broadly. Lastly, Socially Responsible Investing (SRI) is becoming increasingly popular, with good growth in this space across Europe.
From a market perspective, Saudi Arabia continues to be one being monitored closely, given its young and large population and the host of social and economic developments unfolding. Sweeping capital and regulatory reforms have also led to its inclusion in the S&P Dow Jones, FTSE Russell and MSCI Emerging Markets Index in past years, which is helping open up the country to more foreign investment and increase its levels of corporate governance and transparency. The Initial Public Offering of Saudi Aramco this past year was also a watershed moment for the Kingdom, so there are many reasons to be excited about this market.
Aramco’s Tadawul listing could provide further impetus for Saudi’s privatization drive, helping the Kingdom diversify its economy and setting the standard for local corporate governance and transparency. Another geography with great potential is in Central and Eastern Europe. In Poland, only two million of the 28 million Polish population invest in funds, so there is an opportunity to educate investors on how they can take advantage of investing in local and global markets through mutual funds, in addition to traditional bank deposits, to meet their financial objectives. Lastly, Eastern Africa is a bright spot with the level of financial inclusion improving.
As 2020 begins, there are distinct pockets of opportunity across Central and Eastern Europe, the Middle East and Africa. And while fund houses are continuing to leverage technology and data analytics, eye relevant acquisitions, and recruit new talent, remember that meaningful client relationships, ones based on trust, should never take a back seat.
The author is Sandeep Singh, Regional Head of Central & Eastern Europe, Middle East and Africa and Head – Islamic Business at Franklin Templeton