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Tuesday, 4 December 2018

Investment banks to win big as economies converge

The world’s booming middle class population is a potential diamond mine for asset management firms, Chris Flood writes in special report for the Financial Times. One need only look at the likes of Google and Amazon to realize the investment industry is lagging behind in catering to a global client base — particularly the middle classes in EMs.

With recent studies revealing more than half of the world’s population is now middle class, the demand for financial products will continue to surge. Assets under management in the Asia-Pacific, the Middle East, and Africa are expected to increase to USD 38.5 tn in 2025 from some USD 16.1 tn in 2016, according to a PwC report. The growth will be owed to not only an increasing number of bn’aires around the world, but also a growing number of state-owned sovereign wealth funds and private pensions systems. China — which is on the cusp of replacing the EU as home to the world’s second largest investor fund industry — is the market with the largest growth prospects in the coming decade.

While the investment banking industry would naturally grow as the world’s population gets wealthier, growth will favor companies which mobilize against the legal, regulatory, and, above all, cultural challenges. “Historically, there has been a lack of an investment culture in many emerging markets,” PwC partner Olwyn said. Firms will need to be adaptable and tech-savvy to process mns of small value transactions and cater to the mostly young demographics.

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