Living with the new normal
The broad investor hunt for yield after the shock of the 2008 global financial crisis began in earnest in March 2009, after markets had tanked and asset classes had correlated to one. I remember, because I was reporting on it. It has been five years since that trough – or value opportunity – with regulators having imposed a stream of stricter rules since. Banks have been hardest hit, and needed to be.
An investment cycle is widely regarded to be five years. So where are we now? Still in a hunt for yield. Only, it has added urgency now as the five proceeding years have been characterised by low global growth and interest rates. For institutional investors, it’s a headache. What appears to have changed, however, is an acceptance of this new normal. Asset managers in Asia have become more sanguine both about the impact of regulatory diktats emanating out of the US and Europe, and about heightened consumer investment protection rules at home (see page 52). Moreover, asset owners are responding to the low-yield world by overhauling their allocations. Take the National Pension Service, which won AsianInvestor’s award for institutional investor of the year in Korea (see page 82). A big fish in a small pond, the world’s fourth largest pension fund has been increasing its portion of overseas exposures to near 20% of its portfolio and alternative investments to near 10%. Expect more of the same.
Appetite for alternative investments is a recurrent theme throughout these pages. With bond yields scraping the bottom of the range and global equities expensive – price-earnings ratios are around 25% today versus 15% historically – institutions are targeting the 4-5% illiquidity premium of private markets.
Increased risk appetite in the search for yield is creating new opportunities for asset managers. They are expecting the majority of flows over the next year to come from sovereign wealth funds and pension funds, as well as the mass affluent – in other words, the largest and the smallest investors (see page 54). This is also something that plays out in these pages. The largest 300 institutional investors in Asia Pacific have seen assets grow 1.8% to $34.9 trillion in the past year, even with a big currency hit due to yen depreciation. Among these asset owners, sovereign wealth funds are the fastest growing (see page 14). At the same time, there are reasons to believe that structural factors in Asia will support retail flows into multi-asset funds despite their faltering performance (see page 44).
China, of course, encapsulates both factors: increasingly asset-rich institutions striving to expand internationally, combined with a chance to tap the world’s most populous nation. It’s easy to see why managers regard China as the biggest and best opportunity. What will be telling is whether Beijing (and Hong Kong) can deliver meaningfully on the forthcoming liberalisation initiatives.
04 On the move
Buehlmann replaces Sotorp at UBS Global AM; Nomura AM opens in Dubai; HSBC Global AM names new Asia chief executive
08 Regulatory Analysis
Stock Connect plan sparks worries over rat trading in Hong Kong
09 Regulatory Roundup
Malaysia’s new capital markets rules; Taiwan relaxes limits on overseas investing
10 Data Centre
Findings on sovereign wealth fund allocations from a recent report
China’s Second Continent: How a million migrants are building a new empire in Africa, by Howard French
12 Korean institutions plan allocation shifts
Asset owners are re-assessing exposures to bonds and domestic equities and exploring alternative strategies.
14 AI300: The top 300 institutional investors by assets in Asia Pacific.
30 Q&A: Gary Brader, CIO of QBE Insurance Group
32 AustralianSuper raises property exposure; CIC vows to improve systems; new head at Future Fund
34 Asian private banks look to build out platforms
Southeast Asia wealth management heads debate challenges and opportunities with BNY Mellon.
40 Q&A: Alexis Calla, global head of investment advisory and strategy at Standard Chartered
42 Nomura integrates Asia, Japan wealth units; UBP builds multi-family office
44 Multi-asset funds: fad or fundamental?
Mixed performance has led to outflows from these strategies, but their future in Asia may be about more than just returns.
52 Investors are keen on alternatives and Europe, and want Japan to enter a passport scheme, find the Clifford Chance/AsianInvestor survey.
58 Modi win fills fund managers with hope; Axa IM, JP Morgan AM on retail expansion drive
60 Australia’s tug of war over hedge fund fees
Though notoriously resistant to hedge fund fee levels, superannuation funds are looking more at the asset class.
62 Q&A: Darren Massara, NewQuest Capital Partners
64 Incapture readies hedge fund, eyes Asia; Hamilton Lane expands team
66 Traders turn to Swiss army knife solution
Complex trading strategies are driving demand for multi-asset electronic trading platforms.
68 Operations manager: Michael Coleman, RCMA Asset Management
69 MSCI keeps A-shares waiting for EM status; wake-up call for RMBelievers
69 Trader talk: Dominic Ho, CSOP Asset Management
80 Korea Institutional Investor Awards
AsianInvestor hosted its fourth annual Korea awards in Seoul in June. Here are the reasons we chose the winners.
83 London sets out its stall as RMB hub at the LSE Greater China forum in Hong Kong.