The lower 100 institutional investors count 10 new asset owners in this year’s AI300, including six that have returned to the list after missing the cut in previous years.
Overall, assets under management (AUM) in the 201 to 300 bracket of asset owners grew by around 2% from last year, according to AI300 data.
AIA in South Korea, SCB Life Assurance in Thailand, and StatePlus Retirement Fund and Local Government Super in Australia all made their debuts on the 2017 AI300, with a combined AUM of $34 billion. AIA South Korea was the top-ranking newcomer in the bottom bracket, coming in at 261, with around $11 billion in AUM.
Australia also had three institutional investors returning to the AI300 after dropping off the 2016 list, including Bendigo and Adelaide Bank, MTAA Superannuation Fund, and Vision Super. South Korea’s Seoul Guarantee Insurance Company and the Central Bank of Sri Lanka also reappeared on the list after a year's absence, while the Korea Credit Guarantee Fund made it back on the list for the first time since the 2014 AI300.
The total AUM for the 10 new entries in the lower 100 was $70.2 billion.
Total AUM in the AI300 grew by almost 3% from the previous year, an increase that may have been driven by rising global equity returns, according to Adeline Tan, head of advisory at Mercer in Hong Kong.
“I would point to the market rally in the year to date,” Tan said. “Equity investments are significant in Asia as a growth driver and continues to feature highly in any strategic asset allocation.”
The MSCI World Index showed 16% returns year to date, while the Emerging Markets Index had around 28% returns in the same period.
Australian pension funds, or super funds, and Indian insurance companies in particular saw large AUM growth in this bracket, increasing by around 17% and 21%, respectively. Meanwhile Philippine commercial banks' AUM contracted slightly by around 4%.
Super fund representation
Twenty-one out of the 27 Australian asset owners in the lowest 100 were super funds, the largest single sector representation by one country in the bracket. They also accounted for four out of the 10 new asset owners in the lower 100, and super funds AUM increased by 16.7% from 2015, to $226.9 billion.
The top ranked super fund in the 201-300 bracket was Wealth Personal Superannuation and Pension Fund, coming in at 204 after growing its AUM by around 6%. IOOF Portfolio Service Superannuation Fund, ranked 229, had the highest AUM growth among lower 100 super funds at 25%.
Hostplus Superannuation Fund, number 265 on the AI300, had the second highest AUM growth, at 11.2%, a result achieved through strategic asset allocation to unlisted assets and active management, chief investment officer Sam Sicilia told AsianInvestor.
Member contributions were another major factor towards the pension fund’s AUM growth, Sicilia said, and he anticipates that member net cash inflows will remain strong over this year. An August report by industry regulator Australian Prudential Regulation Authority showed member contributions into Australian pension funds were up 45% in the twelve months to June.
An increase in contribution inflows can be attributed to good employment rates and economic growth, Tan explained. The unemployment rate in Australia reached a four year low of 5.5% in September, and monthly full-time employment grew for the 12th consecutive month, the Australian Bureau of Statistics said in an October press release.
Indian insurance companies also saw significant AUM growth in the lower 100, led by HDFC Standard Life Insurance (26.1%) and SBI Life Insurance (24.6%).
Overall, a total of four Indian insurers were represented in the bottom bracket, including ICICI Prudential Life Insurance and Bajaj Alliance Life Insurance, and total AUM grew by 21%, to $55 billion.
ICICI Prudential Life Insurance, ranked 215, was the top ranked Indian insurance company in the 201-300 bracket, growing their AUM by 20%.
The Indian insurance sector benefited from the country’s demonetisation program, as well as a dearth of other investment avenues, according to SBI Life Insurance CIO Gopikrishna Shenoy.
Premiums for Indian private insurance companies saw a 20% year on year growth between November 2016 and June 2017, after the introduction of demonetisation, according to a Reserve Bank of India report released this August. SBI’s own premium growth has been around 30% the last two years, Shenoy said.
Shenoy is confident that SBI, ranked 228 on this year’s AI300, can continue their growth momentum, citing strong premium income growth and market performance. “I don’t see any reason why the AUM growth should not grow the way we have grown in the last two to three years,” he said.
In contrast, a volatile domestic market in 2015 and early 2016 had a negative impact on the Philippine economy, according to an April 2016 World Bank report, reflected in the lower AUM among Philippine asset owners in the bottom bracket.
The country’s institutional investors saw AUM narrow by around 3% in the lower 100, led by its four commercial banks, which saw AUM fall by 4%.
Land Bank of the Philippines, the top ranked Philippine commercial bank at 223, saw its AUM fall by around 13%, while Metropolitan Bank and Trust, number 241, narrowed their AUM by around 17%. Bank of the Philippine Islands’s AUM, ranked 250, remained relatively stable, increasing by less than 1%.
One notable exception was BDO Unibank's 21% AUM growth, which benefited from clients moving up the risk scale into money market funds, bond and equity funds, head of trust and investments group Ador Abrogena said.
His expectations for future growth at BDO, however, ranked 230 this year, are dimmed by high valuations on the market, prompting investors to move out of equities as their target returns are met, and the expectations of increasing rates, which lowers the attractiveness of fixed income investments, he said.