Global Insight: Unlocking Growth through Location and Localization Strategies in Asset Management

In the fiercely competitive landscape of asset management, location and localization are key drivers of growth. Whether expanding in existing markets or venturing into new territories, asset managers need to tailor their product offering and client experience to meet local preferences, whilst efficiently navigating different local regulatory and market structures. In this article, Alpha experts located around the globe share their hands-on experiences to give a flavor of the challenges that incoming asset managers need to address. That said, the diagram below is far from a complete list of requirements – if you’re working on your firm’s growth plan, don’t hesitate to call for an in-depth discussion.

Europe’s asset management landscape is a mosaic of regulatory nuances, consumer preferences, and distribution dynamics. From the institutional dominance in the UK and the Netherlands to France’s bancassurance model, distribution and client coverage strategies must align with each market’s structure. On the product side, it is a half-truth that funds are transportable via Luxembourg and Dublin fund structures, as investors often prefer localized products which offer advantages such as slightly higher tax efficiency in UK, or compliance with local ESG standards in Belgium and France. In Switzerland, for instance, investors classify funds differently due to non-standard asset classes, imposing constraints on portfolio allocations. “Success requires local knowledge to know where a pan-European approach will and won’t work, and attention to detail is key,” states Claire Hepworth. “With the right setup, it is possible to centralize or offshore servicing and operational support, whilst still meeting local language preferences.”

US market scale presents asset managers with a huge opportunity, offset by the challenge of building market presence while competing with incumbents. “In the US, differentiation is crucial given the market scale and homogeneity,” asserts Brett Nielsen, emphasizing the need for tailored branding and digital experiences. The market structure is also different to other geographies, with segments like Wirehouses and Broker-dealers requiring specific coverage. Compliance with SEC regulations paramount, with personal liability meaning very robust operational processes are required. This combination makes penetrating the US a tough nut to crack, with very few European managers achieving scale. The few exceptions took time to build fully localized operation in the US, which in some cases then became globally successful. Canada also offers significant opportunity but requires a sophisticated approach to cover the large pension asset pools, many of whom have significant in-house asset management capabilities. Fly-in institutional coverage from the US is common, given concentration of assets in the Toronto region.

Latin America is fundamentally different to other regions. Currencies commonly yield double figures, so investments must offer attractive yields. Brazil offers a rapidly developing wholesale market, driven by wealth accretion by professionals and business owners. However, product requirements are unique, requiring local wrappers. Other countries such as Mexico and Colombia have fledgling retail investment markets, offering basic savings products distributed by local banks. Political instability means that regional wealth tends to flow offshore via Miami, the Monaco of the Andes. Tapping this market can be highly lucrative, with some of the highest fee levels on the planet, but requires compliance expertise and a local distribution partner. Institutional asset pools are highly dispersed, with Chile, Brazil and Peru having growing pension institutions that are looking to shift from local to international investments.

The Middle East is transitioning from a fly-in location to a hub demanding localized products and expertise. Institutional dominance, particularly in segregated mandates, offers fertile ground. However, success hinges on tailored offerings and on-the-ground presence, as highlighted by Tom Whitson. “Both Saudi Arabia and UAE are increasingly favoring firms with local entities, in fact both countries are looking at the local economic impact of firms when making selections.” Asset managers are increasingly developing actively managed funds that resonate with local preferences. On the other hand, the regulatory regime is similar to UK and Europe, so many aspects of doing business are transportable. Obtaining visas to move talent can be a time-consuming hurdle, but not significantly different to post-Brexit UK, Europe and the US nowadays.

Asia’s asset management landscape is marked by regulatory diversity, investor preferences, and language disparities. “There is limited harmonization across borders, which makes designing an Asian distribution strategy challenging,” says Amit Yadav. He underscores the importance of localized strategies and partnerships to penetrate diverse markets effectively. “Consider Taiwan, where foreign funds are popular, contrasting with Japan’s strong local bias, where successful managers tend to adopt localized strategies.” He points to a M&A as an accelerated entry route, for example a European asset manager’s acquisition of a local player in Thailand, which facilitated rapid and fully localized market entry and growth.

Australia’s intermediated market demands local presence and regulatory compliance, with the main attraction being the large pools of superannuation assets. However, Super buyers are highly sophisticated and fee-aware, or are advised by local consultants. “Managers have come to Australia after winning a mandate and expected to grow further, but dipping the toe in the water rarely works. Demonstrating long-term commitment is paramount,” stresses James Turnbull. Establishing Australian Managed Investment Schemes (MIS) and securing an Australian Financial Services License (AFSL) is a key step towards developing a wholesale business, where local research ratings, platform listings and advisory approvals are key for growth, alongside boots on the ground to deliver local service and support.

In a globalized industry, asset managers must wield location and localization strategies as catalysts for growth. From Europe’s market diversity to Asia’s fragmentation, understanding regional nuances is key. As Claire succinctly puts it, “Success lies in understanding and embracing the unique dynamics of each market.” By leveraging practical insights and case studies, asset managers can chart a course toward sustainable growth and market leadership.

Contributors

Claire Hepworth, Associate Director, London
Brett Nielsen, Executive Director, Los Angeles
Tom Whitson, Director, Abu Dhabi
Amit Yadav, Associate Director, Singapore
James Turnbull, Director, Sydney