AsianInvestor’s annual survey of the largest institutional investors across Asia Pacific showcased strong appetite for exposure to global markets and alternative assets as well as an appreciation of active over passive investing.
It emerged respondents are as happy to invest directly and to co-invest with general partners and peers as they are to take a fund of funds approach, and they are ready to outsource more to external parties.
Further, they have had to reset their macro-economic assumptions as they face up to China’s growing economic influence. All of this is having a big impact on the way they are constructing their portfolios.
These were some of the conclusions that AsianInvestor has drawn from our annual survey based on our AI300 ranking (published in our July magazine).
Our survey, sponsored by Goldman Sachs Asset Management, received 100 responses from 95 institutions across 15 jurisdictions including central banks, sovereign wealth funds, pension funds, insurance firms, commercial banks and official institutions. For certain questions asset owners were given the option to rank their responses in order of importance.
This year commercial banks made up a greater proportion of our respondents (34%) than in the past. To ensure we created an accurate picture of how Asia’s long-term institutions were allocating money, and to avoid a conservative distortion created by the predominance of liquidity providers, we present two sets of results: one including commercial banks (All) and one excluding them (non-banks). This also enables us to see how banks behave differently.
Based on our survey findings, we sought to dispel 10 myths about Asian asset owners, facts that market observers may have thought they knew about the region’s most sophisticated investor base, but didn’t.
ESG is of no interest in Asia
Not true. When asked which style tilts were likely to increase in importance in their portfolio over the coming year, Asian asset owners (excluding commercial banks) placed environmental and social governance (ESG) second (23%) behind only e-commerce, social media and fintech (24%).
In fact, our responses suggest ESG is far more important to long-term institutions than it is to commercial banks, whose top response to this question was sectoral, with ESG a distant third and only narrowly above value/small cap.
Europe has led the debate on ESG for several years now, following by the US. Finally, it appears a more socially conscious public are exerting pressure through forms such as social media.
Interestingly, high-profile scandals such as VW being collared for emissions cheating has raised its importance on a global stage.
This is particularly relevant because it has a material impact on the bottom line and therefore portfolio performance, incentivising Asian institutions to take note.
It should be noted that of our survey respondents, 15% are from Japan and 11% from Australia, where ESG considerations are either topical or embedded.