The shockwaves of the Covid-19 pandemic have prodded institutional investors to adopt more diversified and flexible investment strategies as part of efforts to diversify their portfolios. And an integral part of that process will be more widespread adoption of big data and technology analysis tools.
A key proponent of introducing more technology to investments, both internally and externally, is China’s Ping An Group.
“There will be severe economic pain in most economies and even severer investment climate change over the two to three years which is not yet sufficiently reflected in market,” Jonathan Larsen, chief innovation officer of the conglomerate in the webcast "Investment Processes of the Future" hosted by AsianInvestor in partnership with BNY Mellon on September 24.
Larsen highlighted the importance of investors’ adoption of data-driven and tech-focus tools to help them get through the pain of unstable financial markets. He pointed to the efforts that his financial conglomerate has adopted.
“Tech-wise, the group has been building up a centralised investment process where all kinds of investment approvals or clearings can gather together, and being served by tailored process based on the nature of portfolios,” he said.
LONGER-TERM TECH ECOSYSTEM
Thailand’s Government Pension Fund (GPF) and Malaysian state-owned asset manager Permodalan Nasional Berhad (PNB) have also sought to improve their technology and data amid Covid-19.
“We have to be more flexible and be ready for more disruptions,” said Encik Muzzaffar Othman, chief technology officer in PNB, speaking in the same webcast. He noted that the firm hopes its self-built data warehouse will provide up to 80% of the asset data required to support its in-house asset managers over the coming six to nine months.
PNB, which had RM312 billion ($75 billion) at the end of 2019 from 14.3 million accounts, has also applied many changes to its internal policies “so that the firm is able to build something quickly in the backend where multiple asset classes can collaborate in one system,” Othman added.
In 2019, the asset manager stated intention to leverage on digitalisation and implemented a Five-Year Technology Blueprint to further strengthen its core system from data, analytics and execution, respectively.
Thailand’s GPF had also deployed a new analysis tool called ‘Cram’ which enables the pension fund to collate and analyse data from both internal and external sources. The pension fund, which according to secretary general Srikanya Yathip, secretary general of GPF has Bt788.8 billion ($25 billion) in assets, has also included a technology-driven collaborative platform in its overall three-year plan.
Rohan Singh, Asia Pacific head of asset servicing from BNY Mellon, noted that building a technology ecosystem has risen to become a group strategy priority, as well as jumping up the agendas of asset owner chief executive sand chief investment officers and board members. BNY Mellon has launched three new data and analytics solutions to help investment managers to better manage data, he added.
As of March this year, BNY Mellon had $35.2 trillion in assets under custody or administration, plus $1.8 trillion in assets under management.
SEEKING UNDERVALUED ASSETS
While Covid-19’s impact promises to keep throwing up investment uncertainty for asset owners, Ping An’s Larsen was relatively optimistic – in large part because of the China focus of his company.
This particularly applies to private asset investments, an area where a lot of development is needed and is likely to take place. “Probably many people wouldn’t know that China’s private markets are pretty under-developed,” he noted, adding: “We believe China will serve investors well from investment prospective.” Larsen did not mention any particular portfolio objectives or updates.
Srikanya also told the webcast audience that GPF sees pockets of opportunity. She mentioned that the pension has been looking for under-valued assets while being defensive by using tactical allocation, to improve risk-adjusted returns.
“We try to be selective when looking for under-valued assets,” she said, “GPF changes its portfolio quite often and make them to be more data-driven, not just relying on individual decisions.”
ACCELERATING TECH INVESTING
Aside from hunting for under-valued assets, Ping An has been making other tech investments both to improve returns and become more sustainable.
Larsen noted that the Ping An Global Voyager Fund, a venture capital-focused investment vehicle of which he is CEO, has followed in the steps of parent Ping An Group's fintech-focused strategy and invested in next generation businesses such as artificial intelligence (AI) and machine learning. This is to keep at the forefront of a global fintech race, along with coping with investment methodology changes taking place amid the pandemic.
The VC-focused fund led a $146 million capital raise for iCapital in March, a New York-headquartered platform specialising in alternatives investments. US financial group Goldman Sachs and the world's largest asset manager BlackRock are among the investors in the platform.
Some of these tech investments have demonstrated their worth over the past year. For instance, Ping An Good Doctor saw the number of new registered users grow increase by tenfold between January 22 and February 6 versus January 1 to 21 as the Covid-19 outbreak peaked in China. The online consultation platform is armed with AI and smart data processing.
Ping An Group has also increasingly sought to combine AI with environmental and social and governance (ESG) information to drive its investing decisions. In the first half of 2020, AI-driven sales reached Rmb176.3 billion ($25.9), up 104% year on year, according to an interim report by Ping An Insurance.
Please look out for a recording of the webcast 'The Investment Processes of the Future', to appear very shortly. If you have not yet registered for the event, you can do so here to receive the on-demand recording, once available.