Winners rationale

In 2017, passive investing at Asia’s private banks continued to flourish in size and diversity, amidst an ongoing drive to grow assets and enhance performance within discretionary mandates. Concerns about fixed income alpha generation and liquidity led wealth managers to seek passive alternatives and demand for beta outside of traditional index investing drove assets into various smart beta products. Meanwhile, the increasing fee scrutiny by HNWIs in the region resulted in expanded discretionary mandate offerings invested solely into ETFs.

iShares once again stood out from the competition, not only by maintaining its status as a leader in ETF pricing and size, but also through persistent innovation and a client-centric approach to delivering relevant solutions. iShares delivered smart beta products, particularly value ETFs, as investors shifted focus to fundamentals after the US election results.

Contrary to existing doubts that ETF providers would be able to prosper in the fixed income space, due to the counterintuitive nature of cap-weighted products in the asset class (as it rewards the biggest borrower with the biggest share), iShares managed to tap significant demand from private banks into a range of more granular exposures including USD investment grade bonds, US Treasuries and emerging market debt.

Proof that the largest passive product provider did not rely on scale alone was in its client-centric approach to delivering tailor-made solutions where necessary: it delivered customised multi-factor allocation strategies to two wealth managers, including Bank of Singapore, which includes both smart beta ETFs and cap-weighted ETFs for diversified exposure. By mid-year, iShares had already registered nearly US$1 billion in inflows from private banks in Asia.

Time will tell if passive will trump active, or vice-versa, or if the investment arena is big enough for both disciplines. But in 2017, private banks in Asia were most certainly confident that ETFs have a meaningful and effective role to play in portfolios. Gatekeepers, in turn, selected iShares as the Best Fund Provider – ETF.