AsianInvestor’s annual institutional excellence awards are designed to identify, recognise and celebrate the asset owners of the region that are either best-in-class in their institutional areas or geographies, or are fast strengthening their capabilities and worthy of notice.
Asset owners across the region are operating at an increasingly high standard in many areas of their operations. In addition, market conditions have been turbulent, making for tougher investing.
While that has made choosing the final winners more difficult, it is also pleasing to see a growing crop of impressive institutions across the region.
This year's winners by country and region were therefore particularly impressive. They combined continued improvements in their processes and internal resources with an astuteness to create increasingly complex investment portfolios amid tougher and less predictable markets.
It’s a sign of the ambition Prudential has for its regional operations, under chief investment officer Stephan van Vliet. He joined from ING in May 2017. Other recent country CIO hires include Esther Ong as CIO for Malaysia from Allianz in May, Novi Imelda as CIO for Indonesia from AIA in February 2018, and most recently Will Chen as CIO for Taiwan from FWD.
As a group, Prudential is in the midst of splitting itself into two, with its Asia operations set to form the core of a fast-growing business that includes Africa and the US. Practically, this means van Vliet and his team will likely gain more autonomy in how they do their investment jobs and a higher profile within the business, once the de-merger is complete in 2019.
Observers and consultants say Prudential’s investment team welcomes smart investment ideas too, including a rollout of infrastructure investments during 2017 and into 2018.
That said, it focuses its investments through in-house asset manager Eastspring Investments. The fund house has just implemented BlackRock’s Aladdin operating system, giving Prudential more flexibility with its investment products – and hence policies – across the region.
That includes a range of unit-linked and participating fund products that it has rolled out across the region to offer more offshore investing possibilities, including new Shariah-compliant equity and bond funds in Indonesia.
Eastspring has also allied with BlackRock to roll out exchange-traded fund products, which should also benefit Prudential’s cost of investment. And its signing of the United Nations Principles of Responsible Investment ESG principles indicates a rising commitment to environmental, social and governance investing.
Whineray told AsianInvestor in our September/October 2018 edition that NZ Super accepts that it takes sizeable investment risks and that in the event of another financial crisis these could have a big portfolio impact. But he accepts these risks – and, indeed, published a report detailing them. Whineray said he feels the public need to understand how NZ Super invests, and that its very long-term investment horizons mean it must accept such risks during times of elevated asset prices.
The commitment to transparency is laudable. So is its desire to markedly reduce carbon; the fund is close to reaching its target of shifting its global passive equity portfolio (40% of its funds) to a low carbon approach. In its latest report, NZ Super revealed its carbon emissions intensity was 18.7% below its baseline level and that its exposure to potential emissions from reserves was 32.1% lower – close to its respective 20% and 40% targets by 2020.
While doing so NZ Super continues offering strong returns; it posted an annual investment return of 12.43% after costs in the 2017-2018 financial year, beating its passive benchmark by 2.02%. Not bad.
Canadian pension funds take a view well beyond simply investing in their target markets. A perfect example of this is the memorandum of understanding that CPPIB signed in September 2016 for three years with China’s National Development and Reform Commission. Through it, the fund provides its expertise to help Chinese policymakers as they address the challenges of China’s ageing population, including pension reform.
CPPIB is not resting on its laurels either. It already invests some 15% of its C$367 billion ($281 billion) assets into emerging markets – most of which lie in Asia – and it aims to more than double that proportion to as much as 33% by 2025. As a result, it could end up adding more than $50 billion of exposure to the region in a relatively short period of time.