The pandemic has made 2020 a year of high market volatility, and Apac asset managers have responded by allocating their investments to the fixed income space, according to an eVestment Asset Flows report.
The report identified the top 10 areas of success for asset flows by Asia Pacific (Apac) managers from 2020 to end June, 2021, and the data showed big positive reversals in allocation to fixed income universes — particularly in global government fixed income and global passive fixed income.
“Passive fixed income is an area that we've seen more interest in lately. In 2020, people were looking at it to exit and in 2021, they've been looking at it to allocate to,” said John Molesphini, global head of insights at eVestments, in a media briefing.
Many of the universes have continued their momentum from 2020, and Apac asset managers are continuing to allocate funds to China in 2021.
“Onshore China fixed income, Greater China equity, global REIT and China All Shares equity: those universes have continued the momentum they had in 2020. Some of them have almost surpassed what they had in 2020 already – just through two quarters of 2021,” said Molesphini.
NO LOVE FOR EQUITIES
On the other side of asset flows, Apac investors have continued to mainly move their money out of equities, with Japan all-cap value equity topping the list for outflows in the region.
“Other than two US fixed income universes, almost all of the top 10 outflows are equity,” said Molesphini.
“[It’s] maybe not a big surprise if you think about the volatility that took place in 2020. There were some allocations away from equity as a result.”
US intermediate-duration credit fixed income saw the strongest reversal from 2020, going from over $3.5 billion in allocations to just under $2 billion by Q2 2021.
Specifically for the Apac region, the eVestment database recorded more than 4,100 institutional strategies from over 920 asset management firms reporting data, which represents more than $6 trillion in assets for managers in the region. Asset managers are incentivized to report their investment data, as the platform is leveraged by more than 110 regional consultants and investors – such as asset owners, sovereign wealth funds and family offices – who analyse the data to make investment decisions.
Based on eVestment viewership data for Q3 2021, Apac asset owners and investors appeared to share some commonalities.
“For global all-cap core equity, it’s the most viewed in Japan, still very popular in Australia, and still very popular in South Korea and the Philippines, so that is obviously a place of common interest,” said Molesphini.
Investors in Singapore stood out for maintaining their focus on global emerging markets fixed income in hard currency; multi-strategy funds of funds; and frontier markets equity.
Global tactical asset allocation strategies and offshore China equity were of highest interest for Hong Kong asset owners.
BACK IN FAVOUR
For flows from Apac investors, US Securitised fixed income – or mortgages – continued their momentum from 2020 to hold the most appeal for investor allocations in the region in 2021.
“Real estate, and particularly the residential market in the US, has recovered phenomenally well – and the US housing market has gone through the roof from a price perspective. There's not enough homes for the demand,” said Molesphini.
Following the housing market collapse in 2008, mortgages have been generally viewed as a bit of a risky asset.
“I think people are more comfortable about the mortgages being issued, and the quality of the mortgages being issued, than what took place 12 or 13 years ago. There's probably a higher comfort level and people are seeking a little bit more of a return, and you'll get that out of a mortgage universe more so than you will some of the core fixed and government fixed income universes.”