On Sep. 11, STOXX Ltd. won the ‘Best Index Provider Japan’ award from The Asset, whose publications and research are an invaluable source for Asia’s financial decision makers.
For all of us at STOXX, receiving the prize was an honor. It recognizes our commitment and work in recent years not just in Japan, but also in the broader Asia/Pacific region.
Asia/Pacific is undergoing a strong evolution in asset management, driven by a wealthier middle class, an ageing population, and rising deposits and investment penetration ratios. As investors there become more sophisticated, passive investing is gathering momentum, increasing demand for flagship blue-chip indices and smart-beta benchmarks.
At STOXX we’ve embraced this trend with an expanding footprint in the region.
Presence in key markets
Japan has been at the core of that expansion. We have an alliance in the country with Mitsubishi UFJ Trust and Banking Corp. (MUTB) that has produced a successful suite of six factor-based indices, including the iSTOXX® MUTB Japan Quality 150 Index.
But we have invested for growth in other markets too. Taiwan’s Yuanta Securities Investment Trust Company early recognized STOXX’s footprint in the field of passive investment strategies and selected us as their index partner of choice. With them, we took the iSTOXX® MUTB Asia/Pacific Quality Dividend 100 Index to Taiwan, where it is being used for a passive index fund.
Elsewhere, our indices have been used in recent years as underlyings for new product listings in Australia, Korea, Singapore and Thailand.
Diversification in strategies through index investing
One thing that has us all very excited about Asia/Pacific is that growth in the region is stemming from multiple sources.
As their pool of assets under management grows, more investors in Asia are venturing into geographical markets that are new to them. This is creating demand for portfolios benchmarked to traditional European market capitalization-weighted indices such as the EURO STOXX 50® Index and the STOXX® Europe 600 Index.
The plan to expand trading hours at Eurex, Deutsche Börse Group’s derivatives exchange, in December to cover Asian time zones will no doubt add to the growing demand for European equity indices and their futures.
Factor and thematic investing
But at the same time the region is quickly catching up with innovative trends that have already become established in the US and Europe. Among them is the growing adoption of index solutions based on systematic factors and alternative weightings.
A recent presentation we did in Singapore on the universe of factor investing confirmed the interest we are already seeing in flows. The audience listened attentively as we discussed the concept of multi-factor, and in particular the iSTOXX® Europe Factor Market Neutral Indices, a reflection of the momentum that smart-beta strategies are enjoying in Asia.
In April we were named ‘Best Smart Beta Index Provider, Asia-Pacific’ by Structured Retail Products (SRP), our first-ever award in Asia. STOXX has had a prolific presence in the structured-products industry in Europe, where we’ve helped issuers optimize and improve their offering terms, and we hope to replicate the success in Asia.
Asian investors are also turning to passive approaches to target sustainability criteria and thematic megatrends, two areas that lie at the heart of our product strategy. In both cases, we are likely to be at the early stage of adoption and the growth prospects are bright.
We are particularly pleased with the interest we have seen in our thematic indices tracking emerging technologies. This suite includes innovative concepts such as the STOXX® Global Fintech Index and the STOXX® AI Global Artificial Intelligence Index.
Partnerships with local expertise
Our partnerships with local asset management firms and financial institutions help us better assess what regional investors expect and need, and they provide us with well-established networks to reach out with our offerings. These alliances are long-term and key to our growth strategy in the region. We expect this collaboration to deepen to the benefit of all parties involved, end investors in particular.
This presence is complemented by our on-the-ground capabilities with offices in Tokyo and Hong Kong. In both places we have hired staff in the last two years to strengthen our coverage.
We are in an excellent position to grow in a market that is seeing radical transformation in terms of asset management, combined with economic growth rates that outpace those in other regions.
Actively managed investments are still predominant in Asia, but investors are becoming increasingly unhappy with the fees and returns profile they experience. About 29% of global money flows into exchange-traded products (ETPs) so far in 2018 have gone to Asia/Pacific-listed products, according to BlackRock.1 However, less than 10% of global ETP assets are invested in the region’s products.
Asia/Pacific promises many exciting developments ahead, and STOXX looks forward to being part of the transformation.
- iSTOXX® MUTB Japan Quality 150 Index
- EURO STOXX 50® Index
- STOXX® Europe 600 Index
- iSTOXX® Factor Indices
- STOXX® Global Fintech Index
- STOXX® AI Global Artificial Intelligence Index
- iSTOXX® MUTB Asia/Pacific Quality Dividend 100 Index
1 “Global ETP Landscape”, BlackRock, August 2018.