Asset owners in the middle segment of the AI300 grew their assets by a combined 11% over the past year, with investors from Australia and greater China enjoying the most aggressive growth, according to according to our latest AI300 survey.

 A combination of rosy market conditions during 2017 helped mid-sized asset owners far outpace the 4.1% increase in assets under management (AUM) they recorded the previous year.

Institutional investors ranked from 101 to 200 in terms of assets under management (AUM) enjoyed a combined $3.9 trillion. And investors based in Australia, China, Hong Kong, and Taiwan accounted for about 57% of this increase, despite making up just under one-third of the investors in the survey’s middle bracket.

NEW FUND OPERATOR

All-told, the 15 represented Australian asset owners enjoyed the biggest growth, their combined AUM rose by 26.3% to reach $577.4 billion.

TCorpIM Funds, New South Wales’ government-run investment manager for state public entities that ranked 184th in the AI300, was the fastest growing; its AUM soared by 150.2%. The Construction and Building Unions Superannuation (Cbus), ranked 182 grew its AUM by 47.6%, marking the third highest AUM growth in this segment of the survey.

The rapid growth of TCorpIM Funds’ AUM growth is less the product of investments than it being chosen to support a new state investment fund, said a spokeswoman for TCorp, the treasury corporation of the New South Wales government and parent of the asset owner.

“This is a fund set up to meet the future infrastructure commitments of the NSW government. It was funded by the proceeds of privatisation of some NSW government assets,” she  told AsianInvestor.

In December 2016 the NSW government established the National Infrastructure Future Fund (NIFF), to support the state government’s Restart NSW initiative, which was introduced in 2011 to kick-start economic growth through high priority infrastructure projects. The government seeded NIFF with A$15 billion ($11.1 billion), and TCorpIM’s appointment as the manager led its AUM to rise from $18.9 billion in 2017 to $27.6 billion this year.

TCorpIM is confident that it can sustain its growth momentum, in part because of new NSW government initiatives such as sovereign wealth fund NSW Generations Fund (NGF).

Launched on June 19, the fund will be seeded with $2.2 billion in the NSW 2018-2019 budget, as well as the proceeds from the sale of the government’s stake in WestConnex, an underground motorway system in Sydney that is still under construction. It will be managed by TCorp, which will likely assign TCorpIM to handle the investment work.  

“Following the imminent planned sale of a majority stake in WestConnex, returns from the state’s retained interest in WestConnex, including distributions, will be directed into the NSW Generations Fund,” the TCorp spokeswoman said.

EQUITIES AND PROPERTY

Cbus, the Melbourne-based superannuation pension fund that focuses upon construction workers, increased its AUM in a more traditional fashion.

Aside from receiving more inflows of assets from its members, the fund made some successful investments in equity and real estate. These helped its AUM grow by 47.6% to $27.8 billion last year, and propelled Cbus 32 places upwards in the AI300 rankings.

“The best performing asset classes in our portfolio have been Australian and international shares and property,” Kristian Fok, chief investment officer, told AsianInvestor.

Cbus reported an 11.9% return for its default option fund in 2017. About 25% of this fund is allocated to Australian shares, with another 23% was invested into international shares; both asset classes enjoyed healthy returns last year. So did property; it accounts for about 11% of the default portfolio and it supplied 24.3% last year, according to Cbus’s annual report.

However, Fok doesn’t think it can maintain the same momentum this year. He noted that external concerns, such as trade frictions, tightening monetary policies, and other geopolitical issues impacting major economies are lowering growth expectations.

“At this point in time, we would be expecting returns for investment options with significant exposure to growth assets to be lower in [fiscal year] 2017 to 2018,” he said.

Cbus is particularly focused on a review of its longer-term asset allocation weightings between Australian and international shares, due to the relatively concentrated nature of the Australian equities market.

“We are considering the merits of progressively reducing our exposure to Australian equities and increasing our exposure to global equities over the medium term. A potential benefit is a more diversified portfolio,” said Fok.

ACQUISITION

Hong Kong-based insurer FWD Group was another notable success story, in terms of its year-on-year AUM growth. However, the rise was mostly down to its acquisition of AIG Fuji Life in Japan last year, Paul Carrett, group chief investment officer, told AsianInvestor.

The acquisition was completed in April 2017, and the business was renamed FWD Fuji Life Insurance. While details of the deal were not disclosed, media reports said AIG Fuji Life Insurance had less than $5 billion in assets as of March 2017.

The acquisition helped buoy FWD’s AUM from $17 billion in 2017 to $26.6 billion in this year’s survey. That propelled FWD’s ranking 31 places to 189.

Solid returns in both equities and credit investments also contributed to its AUM increase, but sustaining the same rate of growth this year is proving more difficult, amid higher interest rates and credit spreads, and volatile equity markets, said Carrett.

“We are aggressively looking to diversify our sources of return. This is especially important as we move from a regime of abundant liquidity to one of much tighter liquidity,” he said.

FWD’s diversification strategy is less asset class driven and more asset specific, he added. FWD declined to give specific examples of asset specific investments.