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.
Asian institutions don’t invest in Europe
Not true. In terms of global equity markets, Asian asset owners told us that Europe is overwhelmingly where they saw the best investment opportunities on a relative basis (33%). That was comfortably above the US (23%) and China (13%).
Evidently this is a valuation call, as well as a sign that skittishness over a possible Greek default and eurozone breakup has dissipated.
However, the prolonged nature of the Greek crisis delayed allocations from Asia as institutions waited for the clouds to clear.
Resolution of that crisis means their faith in Europe’s recovery has been restored and has meant they are now eager to allocate, although it will inevitably take time because they were so under-exposed in the first place.
This appears to be one of the factors that investors broadly got wrong; they could have allocated to Europe earlier.
Interestingly there is also a renewal of interest in Japan, and demand for India, which is for the first time seen as a separate asset-class opportunity.