Countries such as Indonesia and the Philippines are becoming more attractive markets for foreign fund managers looking to gather assets, a report finds.

Regulatory changes are helping to make Southeast Asian retail and institutional markets more attractive places to gather assets, which is positive news for wealth manages eyeing the region, according to research and consulting firm Cerulli Associates.

Cerulli forecasts that total mutual fund assets under management in Southeast Asia will grow at a compound annualised rate of 12.3 per cent over the next five years to hit $566 billion by 2021, led by Indonesia.

More open markets and diversified distribution channels are opening doors for foreign fund managers, the firm said, giving the example of Thailand, which in early 2016 began to allow offshore funds to be sold directly. (Although the master-feeder route remains popular among both global and fund houses, however.)

Findings come from a report entitled The Cerulli Report - Asset Management in Southeast Asia 2017: Strategizing for Success.

Among other examples given of wider access to foreign firms are the Philippines, which has allowed standalone trust players to build agency forces. In Malaysia, the country in May issued a regulatory framework for digital investment management, or robo-advisors. And Indonesia in November 2015 permitted Shariah funds to fully invest overseas, which translates into sub-advisory opportunities for foreign managers. 

The firm said more online fund distribution platforms have also been launched across the region, even if they are still a small source of mutual fund assets under management, and regulators are closely eyeing fintech developments to facilitate better access to funds.

"Five years ago, we took the view that Southeast Asia's funds industry held lots of promise that would nevertheless take a long time to unfold," Chin Chin Quah, associate director at Cerulli and lead author of the report, said. "But now, we are more sanguine about global managers' prospects in the region, as signs point to a more level playing field between homegrown and foreign fund houses.”

Asia's fund management industry is seen as offering a tempting set of prospects for firms struggling with rising compliance burdens and relatively sluggish markets in regions such as Europe. A number of foreign players, such as Manulife, Fidelity, M&G and Aberdeen Asset Management, operate in the region.

There are two main ways to offer funds into Asia: registration of the fund with the local regulator for retail distribution; and use of local private placement regimes.