AI300: Asia’s biggest investors, 201-300

Quantitative easing and minimal interest rates in many leading markets are having a negative impact on the performance of Asia’s leading asset owners, our latest AI300 survey reveals.

For the first time since AsianInvestor began compiling the data in 2003, the total collective assets under management (AUM) of the region’s largest investors declined. Their cumulative assets dropped from $36.6 trillion in 2015’s survey to $34.4 trillion this year, a fall of 6% (all our AUM numbers are expressed in US dollars).

It’s a notable drop. Even in the aftermath of the global financial crisis of 2008, Asian assets continued to grow year-on-year, but they failed to do so in 2015.

With economic stimulus and quantitative easing still very much on the agenda in 2015 and 2016, it is not surprising that these numbers are in retreat. The UK’s move to cut its benchmark interest rate to a historic low of 25 basis points on Friday extends the rate-cutting trend among many leading western economies, which has driven many benchmark bond yields into outright negative territory.

The shifting sands of asset returns have had an impact on the organisations represented in the top 300, particularly among the lower 100 asset owners. Of particular note is the number of Korean players and the negative growth of the Australian funds.

Several new Korean names have been added to the list, including insurance companies. The list below, of numbers 201-300, contains 20 Korean asset owners. On average they have seen their assets grow by on average of 9.5% in dollar terms since last year's survey.

Hanwha General is one of the Korean insurers featuring in the list for the first time this year. Its assets grew by 13.3% in the year to February 2016. Chief investment officer Sim Myung-joon suggests the healthy growth figures for Korean insurers, which he said averaged 10% last year in Korean won terms, is at least partly attributable to a strong year in net income terms.

The Korean Insurance Research Institute estimates the net income of Korean non-life insurers increased by 15.6% over the course of 2015. These companies enjoyed a particularly strong end to the year, putting on 30% in the last quarter of 2015 alone, compared to the previous year. The return on equity for Korea's non-life insurers was 9.6% over the whole of 2015.

Additionally, the net income of Korean life insurers at the end of 2015 had increased by 11% from the previous year, while the insurers’ total premium income increased by 6%. Sim says the strong showing for life insurers was partly due to Korean individuals shifting assets from pure investment to pension and insurance products.

Aussie asset drops

While Korean insurers enjoyed strong asset performance, Australian funds have had a contrasting experience. Several firms from the country that made the cut last year dropped off the bottom of the list this year, while the average AUM for the 24 Australian institutions represented in the lower third of the list is down 14.67%.

This is, in part, a stark reflection of the tougher times Aussie funds are experiencing as they struggle to maintain the level of assets seen during the recent commodity boom years. However, these negative numbers should also be considered in the context of the Australian dollar’s fall against the US dollar over the last two years.

The Australian dollar has been trending down from parity with the US dollar in mid-2013 to today’s A$1.31 level. Since many of the Australian funds report to a financial year ending in June, the fall of the currency in the 12 months to June 2015 was a major contributor to the Aussie asset owners' negative numbers.

Chart: Asian currency FX rates -  AUD-USD (orange line), KRW-USD (blue line), MYR-USD (red line)

Source: Bloomberg

Elsewhere in the region, the decline in the AUM of the included asset owners reflect difficult trading conditions, especially in the second half of 2015, when many institutions raised their cash levels. In the case of Malaysia, funds were generally in decline owing to poor local market sentiment and a weak currency.

As in previous years, asset numbers for sovereign funds and some official institutions are based on accepted industry estimates, confirmed by input from a number of industry experts.

The AI300 is the result of detailed research by AI’s team, supported by input from our sponsor firms Willis Towers Watson, Goldman Sachs Asset Management and Nomura Research Institute (NRI). Shin Kwangho and the WTW team in Seoul helped us with the Korean numbers, while Sadayuki Horie of NRI provide the data on Japanese institutions. Bernice Cornforth, AsianInvestor's head of polls, compiled the listing and produced the spin-out tables.

If you would like to see the full list of the 300 largest institutions in Asia, together with country and sector breakdowns, you can subscribe to AsianInvestor and receive the July edition by clicking here