Five years after the global financial crisis, Asian institutional investors have become more sophisticated and discerning in their approach to seeking alpha. But they also face greater demand for transparency and accountability, both externally and internally, when making allocation decisions.
While asset owners are increasingly eying alternative assets to compensate for lacklustre returns from equity markets, instances where asset managers have failed in their fiduciary duties have highlighted the need for more robust due diligence on external managers. US-based SAC Capital is perhaps the most obvious recent example.
According to a recent survey by KPMG of 27 Asian asset owners with a combined $2.2 trillion in assets, 63% said their investment approach has changed as a direct result of the changing market conditions and regulatory requirements post-crisis. These organisations also indicated that there has been an increasing need to merge risk management into their investment process.
Moreover, the survey showed that asset owners are looking at allocating their risk exposure on a more granular level rather than a rough 80-20 split between fixed income and equities.
The need for independent risk monitoring, valuation and performance reporting has risen to the top of investors’ due diligence check list.
Meanwhile, the demand for transparency – from regulators and investors alike – is driving asset managers to seek support and guidance on best practice. They grappling with more onerous requirements as a result of regulations such as the Alternative Investment Fund Managers Directive and the Foreign Account Tax Compliance Act.
Demand for accountability and social governance also means asset owners seeking tools that can help them better understand their exposure to sectors and geographies as a result of their underlying holdings.
Speaking to Georgina Lee of AsianInvestor, and taking questions from a live online audience, Paul Finlayson, head of private equity product at Northern Trust, and Peter Sanchez, CEO of Northern Trust hedge fund services, will tackle issues confronting Asian asset owners in administering their alternative asset portfolios.
To listen to the live webcast starting at 11am Hong Kong time today, please click here.