AsianInvestor’s annual institutional excellence awards are designed to identify, recognise and celebrate the asset owners of the region that are either best-in-class in their institutional areas or geographies, or are fast improving and worthy of recognition for their efforts.
Asset owners across the region are operating at an increasingly high level in many areas of their operations. While this has made choosing this year’s winners more difficult, it is also a pleasing sign of the rising level of investing sophistication in the region.
This year's winners by country and region were therefore particularly impressive. They combined continued improvement to their processes, internal resources and the astuteness with which they interweave increasingly sophisticated investment portfolios amid a tougher market environment and high asset valuations. They are all worthy winners.
With a target of becoming one of the big six players in Australia’s superannuation industry, Sunsuper’s growth strategy is to pursue mergers with smaller funds—an ambitious plan that caught the eye of our judges this year.
Sunsuper is the only sizeable fund willing to push through the hard negotiations needed to complete mergers and this year it added A$3 billion ($2.28 billion) to its funds under management when it amalgamated with Melbourne-based industry fund Kinetic Super.
The deal took three months to land and brought Sunsuper’s total assets to A$46 billion and 1.3 million members. It followed another take over in August last year of the A$1.25 billion corporate super fund for employees of the Reserve Bank of Australia, the central bank.
Sunsuper is now the ninth largest super fund in the country and the fastest growing. Its balanced option returned 12.3% in the year till end June 2017 ranking it fifth in a field of 60 peers and outperforming heavyweights such as UniSuper, Cbus and Rest. Five-year returns stand at 10.9% placing it in the top 15 funds nationally.
In October the fund cut fees for pension products by 25% in a bid to sharpen its competitive edge and attract new members who might traditionally be drawn to lowcost industry funds.
Sunsuper is also embarking on a plan to boost investments in hedge funds and alternative assets by 50% over the next two years. Under portfolio manager Bruce Tomlinson, who runs alternative strategies, the fund will reduce its reliance on domestic consultants and cut out intermediaries.
Tomlinson’s team is now sufficiently resourced to undertake the work in-house. One plank of the strategy is to get closer to managers overseas, especially those in distressed debt, direct lending, reinsurance and asset-backed securities. The target is to deliver 7% to 10% in net returns from alternatives.
Ping An Life Insurance
Long regarded as one of China’s most sophisticated investors, Ping An Life continued to impress over the past year, despite its offshore activities being constrained since late 2016 by its home country’s crackdown on departing capital, in a bid to shore up the value of the renminbi.
Observers credit the insurance company for having actively looked out for international private equity and mutual fund investments right up until the government closed the gates on such activities. These overseas activities have helped underline its willingness to diversify into long-term assets. Ping An Life now has external managers managing Rmb60 billion ($9 billion) of its assets under management; it has more than Rmb100 billion in total overseas assets.
It has not been idle in the year since either. Indeed, it has little choice, given that its assets are growing by 20% a year. The insurer has made active investments into Hong Kong’s thriving stock market during 2016 and into 2017, and it is seeking to modernise its own product output too, studying the pension offerings of other countries such as target-date funds, which have proven highly successful overseas.
The company has also evolved its real estate investment strategy, slowing overall allocations to this sector as yields have declined and focusing on commercial properties with a logical expectation for long-term improvement. This included tier one and tier two city prime office buildings, and warehouse logistics in cities central to distribution of goods.
The insurer has adopted and applied international asset allocation models and methodologies too, including an economic scenario generator, to best assess the risk of its investment portfolios, and Monte Carlo Simulation methods to simulate asset allocations and investment returns. In addition, Ping An Life is trialling some smart-beta strategies including low-volatility, risk parity and other types of factor-based investing.
Hong Kong Jockey Club
One of the most renowned endowments in the region, the Hong Kong Jockey Club stands as a leading asset owner for its home territory. It has long been notable for its willingness to embrace many asset classes in its quest for returns, utilising external fund managers that invest its assets internationally.
The Jockey Club first branched out into various types of private credit investing nine years ago, while it has conducted private equity-style investments for 10 years. Over the past two years it moved into new areas of private credit and into multi-asset strategies.
It’s been a sound strategy. The Jockey Club has beaten its own benchmark over one, three, five, 10- and 15 years, and its (undisclosed) assets under management are believed to be at an all-time high.
Perhaps most exciting was the organisation’s decision over the past three years to incorporate environmental, social and governance (ESG) considerations in its investing.
Hong Kong has not been at the front of the pack in Asia when it comes to promoting socially responsible investing and governance, but the Jockey Club has sought to stand out as a trailblazer.
The club created its own dedicated ESG department, and during 2015 and 2016 it greatly reduced the carbon intensity of its own organisation. Today, well over half of the AUM it has with external fund managers are invested using ESG policies, while at least another 10% incorporate ESG factors into their investment analysis.
That sort of commitment stands well with the club’s longstanding charitable activities, and will hopefully help persuade more Hong Kong institutions to consider ESG practices in their investing too.
Look out for the second part of Institutional Excellence award market winner profiles tomorrow, plus the recipients of the institutional and proficiency categories in the coming days.