Southeast Asia is a patchwork of cultures, varying widely in language, regulations and business practices, making it a challenge to distribute offshore products in the region.
"Barriers to entry for foreign managers have historically been high, not only from cost and revenue standpoints, but also because of restrictions on overseas investment and foreign ownership to varying degrees across each country," said Evonne Gan, analyst.
But this is changing, she added, noting that the Philippines has recently allowed feeder unit investment trust funds while Malaysia has been loosening foreign ownership restrictions.
"There have been positive developments on the distribution front. These events have revived the interest of foreign managers in the region," said Gan.
In Indonesia, foreign managers with a local presence can look to foreign banks for distribution. New entrants can use both local and foreign banks in the country.
"Selling through banks is not easy in Indonesia. Local banks, in particular, would much rather push sales of other products which offer them higher fee income," said Yoon Ng, Cerulli's head of Asia research.
Still, three out of the top five managers in Indonesia are not local, implying that the number of foreign asset managers have potential to grow, Ng added.
For example, Ashmore Asset Management started distributing its products through Indonesia's Bank Permata and subsequently added several foreign banks to its distributor list, said the report.
Eastspring Investments first entered the Indonesian market in May 2012 and appointed Standard Chartered Bank as its first fund distributor while recently it has tied up with HSBC Bank and Bank Permata.
A feeder fund approach or working with an insurer to put a local wrapper on foreign funds is another approach.
Ng claims that BlackRock, State Street Global Advisors and J.P. Morgan Asset Management have seen success in Thailand and Malaysia with feeder funds.
"With the likes of BlackRock and SSgA gathering more assets than some of the onshore managers, it has given conviction to foreign managers without a local presence to start looking closer at the region. Demand for foreign investments is increasing and will continue to grow," Ng added.