Why HKJC excels in terms of innovation
AsianInvestor’s second annual Institutional Excellence Awards were introduced to highlight best practice, with awards handed out in 16 institutions collectively managing $3.5 trillion.
In the category focused on specific areas of expertise, the Hong Kong Jockey Club takes the prize for innovation for its committed and disciplined approach to investing in both old and new types of alternative assets.
The winners were announced on October 30 and received their awards at an exclusive ceremony and dinner on December 2 at The South Beach hotel in Singapore.
We thank all those who contributed their thoughts to these awards. The full list of write-ups appears in the December issue of AsianInvestor magazine, and more details of our decision-making process can be found here.
Hong Kong Jockey Club
Punching above its weight, the Hong Kong Jockey Club has pioneered investment into alternative asset classes.
Allocating to new types of investments requires the governance to ensure support among all stakeholders. Those standards of organisational structure, risk management and investment policy, down to operational efficiency, have to reach acceptance at a global level if they are to work. The Jockey Club has a strong culture of insisting on those objectives.
Once those basics are met, an asset owner then faces the issue of how to identify secular trends and select strategies or managers in fields such as private equity when traditional buyouts are at record valuations. This requires the discipline to work with general partners that aren’t just chasing overpriced deals in a crowded space.
The only way really to avoid pitfalls is through experience. The Jockey Club has no doubt made a few mistakes, but after nearly a decade of investing into private equity, it has learned how to pick and choose. As the private equity programme became more mature and with some underlying investments being harvested, the Club has mapped out a commitment-pacing programme to track pipelines with a view to maintaining optimal exposure to private market investments.
In other words, the Jockey Club is among the few asset owners in Asia that is learning how to actually cash in on alternative assets, not just allocate to non-traditional funds. It has also added shorter-term, trading-oriented prop-desk-like strategies that give it returns uncorrelated to markets. Although the Jockey Club has now amassed experience in these fields, it recognises it still has much to learn. It is only starting to invest in new strategies, both liquid and illiquid.
Meanwhile, for global equity it uses long/short strategies to replace long-only managers and for fixed-income it has a credit bucket to focus on special situations, bank loans and direct lending as it seeks to enhance return over the long term. It also has experience with portable alpha strategies in which derivatives are deployed to replicate fixed income beta.
2015 winners already unveiled:
Reserves manager: Monetary Authority of Singapore
Insurance company (general account): Ping An Life
Public pension fund: Bureau of Labor Funds
Private pension fund 2015: Jardine Matheson
Endowment: National University of Singapore
Australia/New Zealand: the Future Fund
Mainland China: China Life Insurance
Hong Kong/Taiwan: Cathay Life Insurance
Japan: Government Pension Investment Fund
Southeast Asia: Government Pension Fund (Thailand)
Governance: New Zealand Superannuation Fund