Product churn plagues Asia fund industry -execs

By Jeffrey Hodgson

HONG KONG, April 15 (Reuters) - Mutual fund buyers in Asia are churning products at a higher rate than U.S. and European investors, a trend likely to crimp profits in the high-growth region for years to come, fund industry executives said on Tuesday.

The rapid buying and selling of funds, and willingness of many firms to cater to hot investment trends, could damage the industry's long-term prospects, as the practice typically eats into returns and costs investors money, they warned.

"Probably the biggest problem we have as an industry overall is that in general our clients are not making a lot of money," Blair Pickerell, head of Morgan Stanley's (MS.N: Quote, Profile, Research, Stock Buzz) Asian investment management arm, told the FundForum Asia conference in Hong Kong.

"If you look at when people got in they tended to get in at the top, which suggests that clients are probably losing money more than they're making money, even though the markets have generally gone up over the last 20 years."

Lured by high savings rates, robust growth and favourable demographics, global fund houses have been stepping up their investment in non-Japan Asia in recent years.

But while growth in assets under management has outpaced the larger U.S. and European markets for much of this decade, many firms underestimate the complexity of making money in the diverse and still maturing region, executives said.

"Many markets are thematically driven, and these investment themes can switch very quickly. There is little ... consistency in the type of fund that attracts the majority of flows in each market," said Lester Gray, the Asia-Pacific chief executive for UK fund house Schroders Plc (SDR.L: Quote, Profile, Research, Stock Buzz).

"This month it may be commodity. In three months time it might be infrastructure. Three months after that it might be emerging market debt."