The region’s 5 per cent growth in assets under management for the latest year – off from an annualised 15 per cent clip for the prior six years – was still relatively strong for a year that saw AUM for the global industry finish 1 per cent lower, the report said.

According to the report, the Asia-Pacific region accounted for 77 per cent of the $1.88 trillion (Bt57.48 trillion) in global inflows for 2018. That marked an acceleration from the region’s 56 per cent share of global flows from 2013 to 2018.

Meanwhile, net profits for Asia’s asset management industry in 2018 grew 3 per cent, down sharply from an annualised pace of 14 per cent over the previous six years.

That subdued profit growth for the latest year could set the pace for the coming five years as global market uncertainties, such as the prospect of trade wars, and geopolitical volatility promise a more challenging environment for money managers, said Fumiaki Katsuki, a Tokyo-based partner with McKinsey.

Even so, with Asia’s less efficient capital markets offering more scope for active management, profit margins for asset managers in the region remained roughly double those of managers in North America and Western Europe, Katsuki said.

Within the region, China remained the prime dynamo driving global asset management inflows, accounting for more than 65 per cent of global flows in the latest year.

Growing allocations from pension funds and insurance companies, meanwhile, continue to redefine the region’s institutional landscape.

The report said while pension funds, with a 40 per cent share of institutional AUM, remain the dominant client segment, allocations from insurance companies are growing quickly – accounting for a majority of institutional flows in 2018 that boosted their share of AUM to 10 per cent from 7 per cent.

Vishal Kaushik, a Singapore-based senior expert at McKinsey, said a growing hunt for yield now has prompted insurers to boost allocations to external managers of fixed income and multi-asset strategies. That, in turn, has lifted their share of institutional flows to 70 per cent to 80 per cent from 30 per cent to 50 per cent a few years ago, he said.

To adapt to tougher conditions ahead, McKinsey’s report cited the need to add scale, potentially through acquisitions; increase focus on “digitising the value chain”; and ensure fee flexibility by focusing on solutions-oriented offerings such as multi-asset strategies.