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.
Low oil prices are a risk
Not true. We asked Asian asset owners what the biggest risk to their portfolio would be over the next 12 months. Oil barely figured across all respondents (5.2%), but the Fed raising rates (22.5%) and China bubbles (21.3%) were prominent.
It appears the regional makeup of our AI300 means they are not exposed in a negative way to continued low oil prices.
It may also be that many respondents did not think of this as a risk as there is little expectation of a sudden price spike. Interestingly, oil was seen as on a par with geopolitics (also 5.2%) in terms of risk, indicating that if there was a real geopolitical shock, Asian institutions are not looking out for it.
“Rates and China are [seen as] far more important from an economic standpoint than geopolitical situations that bubble up,” said Karl Wianecki, chief operating officer for Asia at Goldman Sachs Asset Management.
He suggested we add ‘regulatory environment’ as a possible answer to this question next year, when unintended consequences of post-crisis regulatory change may have become more apparent.