Asia

Introduction

Prudential’s asset management business in Asia supports the insurance operations, and has established itself as an increasingly material retail business in its own right. Today it has retail operations in 10 markets and has more top five market share positions than many other regional players in Asia.

Despite the downturn in the equity markets in the first half of 2008 product innovation has continued with the launch of a number of new funds. PRUPIM Vietnam Fund is one of the country's first institutional property funds. In Taiwan, the PCA Green Solution Fund which seeks to deliver long-term capital growth by investing in climate change related global firms and is the country's third largest IPO. In China, our joint venture with CITIC introduced its third fund, the Blue Chip Fund. PCA Asset Korea launched PCA Emerging Asia Equity Fund in the first quarter of 2008. In the second quarter, several structured funds were launched in response to the demand for lower-risk products.

We have also continued to expand the breadth and depth of our distribution network in Asia. PCA Asset Japan established our third relationship with a mega brokerage, this time with Nomura. In the United Arab Emirates (UAE), our business based in Dubai now has 15 distribution agreements.

Taiwan obtained three institutional mandates with funds under management (FUM) of £116 million in the first half of the year. This includes a domestic equity investment mandate from Taiwan’s New Labor Pension Fund over a three-year period.

Against a volatile market environment, we are taking the opportunity to enhance our investment processes and manufacturing capabilities. This is firstly achieved through strengthening the investment team by hiring talented and experienced portfolio managers and product specialists. Other efforts include enhancing our research coverage, developing new technology applications to facilitate product manufacturing and strengthening of active management of our portfolio risk. We are also building our capabilities to include opportunistically Latin American and other Europe, Middle East and Africa regions.

Financial performance

Our Asian asset management business delivered £1.6 billion of net inflows in the first half of 2008. These were eight per cent lower compared to the same period in 2007 as India and Japan in particular have seen lower net equity flows in this period due to volatility of the equity markets. Of the £1.6 billion net flows, 57 per cent were in longer-term equity and fixed income products, and the remaining 43 per cent in shorter-term money market funds, compared to 23 per cent for the first half last year. Taiwan recorded the strongest inflows for the first half of this year.

Total third party funds under management were £15.7 billion, a decrease of nine per cent compared to the second half of 2007, but up five per cent on the first half of 2007. Hong Kong, India and Taiwan were the main contributors to the year-on-year growth, with funds under management increasing by 27 per cent, 24 per cent and 17 per cent respectively.

Prudential has successfully built a material and profitable fund management business in Asia. Despite the dominance of domestic asset management houses in most Asian countries, our fund management business has established leadership positions in Asia. As of the end of May 2008, our businesses in India and Singapore have secured the second and third positions in the respective mutual fund markets. In Japan, our business is ranked second amongst foreign asset management companies in the market in terms of net fund flows gathered year-to-date. We remain confident that the business is in an ideal position to capitalise on the growth opportunities in Asia.