Biggest 500 investors saw assets rise 8% in 2012

Assets managed by the world’s 500 largest investors – incorporating both asset managers and owners – rose 8% in 2012, making up lost ground from 2011, finds a survey released yesterday.

These entities’ assets hit $68 trillion in 2012, up from $63 trillion in 2011, finds the survey, conducted jointly by investment consultancy Towers Watson and US publication Pensions & Investments.

This growth seems to have been driven more by European and US investor assets, rather than those in Asia. For example, Japanese entities’ assets fell by around 9% last year, while European and US assets rose by 8% and 13%, respectively.

This was due to a combination of strong equity performance and an overall return of investor confidence last year, says Mark Brugner, Asia-Pacific head of manager research at Towers Watson. He points to the S&P 500, which was up 19% in 2012, compared to 2% in 2011.

In addition, people began to “feel more confident about the economic growth – the light at the end of the tunnel was much more visible [than in 2011],” Brugner tells AsianInvestor. “[Investors] began flowing into risky asset classes again, such as equities [in 2012].”

Turning to Asia, Japanese investors – among the biggest in the region –didn’t fare well. Nippon Life Insurance’s assets fell to $663 billion in 2012 from $693 billion; and the assets of Zenkyoren (Japan’s national mutual aid association of agricultural cooperatives) dropped to $532 billion from $575 billion.

Of course, the introduction of Abenomics earlier this year may mean the picture looks rather different by the end of 2013.

Korea did better than Japan last year, if its biggest investor – also the largest in Asia ex-Japan – is anything to go by. Samsung Group’s assets rose some 10% to $338 billion from $308 billion in 2011.

China was a mixed bag. Mainland investment managers experienced jumps in AUM in 2012 over 2011. Harvest Fund Management’s AUM rose 44% to $48.8 billion from $34 billion. E Fund’s assets, meanwhile, rose to $30.2 billion from $28.3 billion, while HuaAn Fund’s AUM increased to $14.8 billion from $12.8 billion.

But not all mainland firms experienced rises in assets – Bosera Asset Management’s assets fell 28% to $21.7 billion from $28.6 billion.

The biggest mainland fund house, China Asset Management, had $50.5 billion as of end-2012, but for some reason did not appear in the previous year’s ranking.

Looking ahead, Brugner does not expect similar global asset growth for 2013, noting that this year equity markets have been much more volatile. For example, hints from the US Federal Reserve that it would start tapering its quantitative easing programme sparked a panic and led investors to yank billions from emerging markets from late May onwards

“That said, in the last couple of months, we’ve seen investors be a bit more positive again,” Brugner says. “There is some room for markets to do well in the coming weeks until the end of the year. But will [assets] tilt to the levels we saw in 2012? I doubt that.

“Overall, we anticipate that at the end of 2013, the market’s AUM as a whole would have decreased a bit compared to 2012.”

Amid rising interest rates, Towers Watson expects bonds will become increasingly risky, while equities will remain moderately attractive. “A lot of the downside scenarios and concerns have been priced into the [equity] markets in our view,” Brugner says.

The survey also notes that while passive investment was a preference by asset owners last year, there may be a shift occurring.

“Last year there was growth towards passive management. But in 2013, I could imagine there will be more appetite towards active investing simply because asset classes’ performance this year has been quite mixed,” Brugner says.

"If you could hire a skilful active asset manager, you would expect him to be able to separate the weak from the chaff and provide returns in a very diverse environment."