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 how they are constructing 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.
Training/knowledge transfer is important
Not true. On a question about the key criteria behind external manager selection, investment performance (70.5%) was the runaway top answer, followed by stability of portfolio team (14.8%).
But training/knowledge transfer barely even registered (1.6%) as a determining factor in the awarding of investment mandates. Asset owners might find it desirable, but other factors are of far greater importance.
Sheila Patel, chief executive of international at Goldman Sachs Asset Management, sees knowledge transfer to institutional clients as more of an after-market service, one that features in the evaluation of a fund manager’s services after it has won the business. “It is one of those qualitative factors that has helped us to hold on to mandates,” she suggested.
So knowledge transfer/training may be a differentiator in cases where management performance among peers is otherwise equal.
Interestingly, the answers show that fees are not a consideration in manager selection either, meaning asset owners are prepared to pay for performance rather than ancillary services.