What’s next on the horizon for mutual funds?

I am at the airport lounge in Singapore on my way to Hong Kong after a whirlwind week of meetings in New York, London, Singapore and now Hong Kong, as I watch Europe held back by a volcano in Iceland (quite literally, as many CEOs scheduled to speak at an industry conference here next week won’t be able to leave).

Barrons this week asked “what’s next on the horizon for mutual funds” and quizzed me for their cover story on T Rowe Price as it is attempting to ‘take over the world’ – click here for the full article.

T Rowe is trying to compete with Blackrock, JP Morgan, Fidelity and Templeton, as they are growing the proportion of their non-US assets rapidly. A focus for the firm naturally is on China, India and other parts of Asia.

So, what is next on the horizon for mutual funds?

I discussed the trifecta of secular growth trends with many CEOs this week, but while most organizations are thinking about growth drivers individually, very few have been able to put them together in one comprehensive strategy.

Predicting is always hard, especially the future. Be that as it may, while the absolute data – by when and by how much – is debatable, the directional trend is not.

Cash, wealth, and an exploding middle class.

Cash: There are currently some $60 trillion in cash around the world waiting to be reinvested at some point in time. Recent turnover – long-term redemptions in 2008 and partial reinvestments in 2009 – shows that independent firms such as T Rowe are gaining, while some of the big brands are suffering.

Mass-affluent and wealthy investors: The number of both wealthy people and the middle class is growing faster in emerging than developed markets.

Wealth: Led by Capgemini/Merrill, a number of studies point out that at any point in the next three to five years the number of HNW investors in Asia will surpass those in North America – you can already see that throughout the downturn. Who buys all the cars and jewelry? The Chinese. Who now designs according to their preferences? Rolex and Porsche. What does that lead to?

Bank of China opening a Geneva private bank. Who heads it? An ultra-HNW advisory partner from LODH. How many Asians are on the website under staff? None, they are all Swiss or European (note to international firms complaining about politics in mainland China: Asia knows how it’s done, when in Rome…).

It’s hard to stop with this question answer style once you start it, but I will try to stop here. If you got it, flaunt it – and Asia clearly is flexing its muscle to prove that this indeed is the Golden Age for Asia and a Once In A Lifetime opportunity to gain global market share.

(P.S. The Cathay flight attendant as she. is setting my table for lunch: “Nice. iPad.” The US businessman in the aisle next to me: “What’s that?”)

Only the rich? No. (Damn, I told you it’s hard to stop).

The exploding middle class: Not that I need Jim O’Neill to make my case, but even Goldman now sees its post BRIC metatrend in the implications of the exploding middle class of Asia and emerging markets. It will grow from 500 million now to anywhere between 1.5 and 2 billion in the next 10-15 years – in, you guessed it, mostly emerging markets.

That has enormous implications for what is on the horizon for mutual funds… a massive future. Fast growing wealth, cash on the sidelines, an exploding middle class, an as of yet non existing retirement industry, an insatiable demand for equities, and a household penetration of mutual funds of less than five percent…. Just like the U.S. in the 1980’s.

Back to the future, Doc.