Asset changes/growth, manager turnover and ESG creating opportunities for institutional asset managers in Asia

Written by Adam Cadle

24/08/2021

Almost 40% of Asian institutional investors plan to make significant cuts to domestic fixed income allocations over the next three years, instead turning their attention to international asset and alternatives markets, thus creating huge opportunities for asset managers.

According to Coalition Greenwich, just 13% of institutional investors expect increases in domestic fixed income allocations in the same period.

Institutions remain firmly committed to plans to increase allocations to international fixed income and equities, and to a broad range of private and alternative assets. As they diversity, institutions also remain committed to increasing the share of assets outsourced to external managers with expertise and capabilities in targeted asset classes. Looking ahead, institutions expect to issue the most mandates in global equity, private equity, global aggregate bonds, and infrastructure debt.

Asset growth is also creating opportunities for global managers. Assets under management by Asian institutional investors grew by 8% last year, to $16.2trn. That growth was fueled by dovish central bank policies driving asset values and continued new assets being invested, The pool of assets allocated to external managers grew at 11%, outstripping total asset growth and keeping the share of outsourced assets at about 22%.

However, dislocations caused by the global pandemic continue to roil the industry, with higher levels of manager switching and terminations altering the competitive landscape. In these volatile conditions, institutional investors are turning to managers with a commitment to providing the highest levels of client service and investment know-how.

The share of institutions reporting that they consider ESG factors to at least some extent in manager hirings increased to 51% in 2021 from 42% in 2020. With so many Asian institutions employing ESG standards in manager selection, the sheer volume of manager turnover caused by the pandemic is embedding ESG more deeply in the industry and ensuring that managers hoping to expand their presence in Asia must commit to robust ESG policies.

Between January and March 2021, Coalition Greenwich conducted 133 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. Countries and regions where interviews were conducted include Bangladesh, Brunei, Cambodia, China, India, Indonesia, Hong Kong/Macau, Malaysia, Pakistan, the Philippines, Singapore, South Korea, Taiwan, and Thailand.

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