Asian institutional investors plan major move into alternative assets

Written by Adam Cadle

12/11/2024

Asian institutional investors are laying out plans to shift portfolio assets to international debt and equity, and, to an even greater extent, to a list of alternative strategies ranging from private debt to hedge funds.

Research from Coalition Greenwich has revealed that 42% of institutions plan to significantly increase target allocations to international/global fixed income over the next three years, and 35% plan major increases to target allocations for international/global equity, with only 4% and 7% of institutions, respectively, planning meaningful reductions.

Over the next three years, 70% of institutional investors plan to significantly increase target allocation to private debt. (Private debt currently makes up approximately 4% of Asian institutional assets.) Over that same period, 58% are planning major increases to infrastructure debt. For both strategies, not a single respondent reported plans to reduce target allocations.

Private debt and infrastructure debt are not the only alternative asset classes generating enthusiasm. Smaller shares of institutions are planning to expand allocations to infrastructure equity, commodities and private equity.

“Despite institutions’ bullishness on alternatives, it will take considerable time for institutions to reach newly expanded target allocations,” said Ken Yap, head of investment management – Asia at Coalition Greenwich and report co-author.

“Some institutions might not get there at all, given limited capacity and the technical demands of assembling and managing an alternatives portfolio.”

Between January and July 2024, Coalition Greenwich conducted 117 interviews with senior decision-makers at the largest institutional investors in Asia ex-Japan. Senior fund professionals were asked to provide detailed information on their investment strategies, quantitative and qualitative evaluations of their investment managers, and qualitative assessments of managers soliciting their business.

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