9DECEMBER - JANUARYTechnological disruptionAs in most areas of business and daily life, the asset management industry is being disrupted by technology, a trend accelerated by the Covid-19 pandemic. Established financial firms are increasingly being challenged by new `digitally native' and disruptive entrants to the market, such as online banks, brokers, robo-advisers, and digital wealth management firms, which tend not to be weighed down by legacy systems or outdated thinking. Asset managers will need to adapt to these changes and evolving consumers preferences to stay competitive and remain relevant. Increased focus on ESG and sustainabilitySustainable investing has continued to accelerate in global markets, with China having overtaken the US as the second largest climate funds market in the world last year. Environment, social and governance (ESG) investing is also becoming increasingly important to younger generations, with research having shown that millennial and Gen Z investors are far more eager than Gen X or the Baby Boomer generations for fund managers pursue ESG objectives. As such, I believe the younger generation is more likely to seek investments in alternative asset classes, such as emerging technologies and innovative industries which support the climate transition. Asia has made significant progress over the last five years in terms of sustainability considerations, but, in my opinion, Singapore stands out as a leader and has become a sustainability hub for many companies, including for us at GAM Investments. This has been enabled by an increasing amount of regulatory support, particularly in relation to climate change. We have also seen the delivery of policy instruments such as green bonds to direct capital to green technologies, as well as improved corporate disclosure to assess the costs and risks of externalities. I believe the next phase of progress will focus on green taxonomies and ESG fund labelling, both of which are under development, or established in Singapore, but which remain highly fragmented across the wider region. Geopolitical riskIt would be remiss when discussing the future of the industry in Asia not to mention rising geopolitical risk in the region. While any major conflict would likely cause significant market volatility and impact investment returns globally, the regional impact would undoubtedly be amplified. In summary, Asia's asset management industry faces several challenges, but many of them also present significant opportunities for innovation and growth. Asset managers need to remain cognisant of these challenges and to prepare accordingly for the changes on the horizon in order to remain competitive and relevant. Asia has made significant progress over the last five years in terms of sustainability considerations, but, in my opinion, Singapore stands out as a leader and has become a sustainability hub for many companies, including for us at GAM InvestmentsRossen Djounov
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