Asian institutional investors seeking portfolio rebalancing – Cerulli

Written by Michael Griffiths

01/11/2022

New mandate activities among Asian institutional investors are emerging in H2, according to a new report from Cerulli.

This comes as asset owners take advantage of attractive valuations to rebalance portfolios in the new inflationary environment.

Institutional assets in Asia, excluding Japan, had one of the best performances in 2021, growing by 6.3% in 2021 to reach $21.2trn. This was propelled by strong global equity market performance and organic asset growth. The biggest contribution was from investable retirement assets, which grew 11.8% year-on-year to $5.1trn, boosted by increasing inflows from members as well as strong performance of existing assets.

Cerulli stated that although Asian institutional portfolios have been relatively sheltered from the impact of the Russia-Ukraine war, compared to their European counterparts, Asian economies are still undergoing inflationary pressures, as most are net importers of oil and gas. The report stated that the long-term goal of increasing asset allocation to risky assets is still on the agenda, but short-term risk aversions took effect to curb appetites for such assets in the first half of 2022.

However, in the second half of 2022, Cerulli has noted increased mandate activities emerging as Asian portfolios looking to revert to strategic asset allocations with year-end portfolio reviews approaching. Despite their risk aversion, the report suggested there is pent-up demand from asset owners looking for new entry points in both traditional and alternative assets.

“Despite concerns among asset owners for new investment allocations in the current market environment, there is an ongoing need for external manager expertise in multiple areas of investment on the back of growing assets,” commented associate director with Cerulli, Soo Ah Ran Cho.

“On the back of increasing assets, diversification needs are becoming more acute in Asian institutional portfolios. As Asian institutional portfolios still have high allocations to local debts, the need for foreign partnerships and investment into overseas assets are expected to increase in the coming years.”

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