The big thaw
It’s a sobering thought that a generation of fixed income portfolio managers working today has never seen a rate hike in the US, nor Japan in a non-deflationary cycle. It underlines how markets have remained in stasis, in hibernation waiting for the icy chill of the 2008 global financial crisis finally to thaw.
Still, the status quo remained firmly in place last month when the US Fed opted to pass on fiscal tightening. It is now nine years, three months and counting since the US central bank raised interest rates, in June 2006. But what was telling in its latest policy pronouncement was that it name-checked China in a way it has not done before. It suggests a fair bit of debate must have taken place internally among the governors concerning the August 11 move by the PBoC to devalue the RMB. It was another notch on China’s belt to underline its growing influence on the global stage.
It showed international investors they can no longer insulate themselves from China’s impact on their portfolio. They need to keep an eye on economic drivers, which is what China is now, even if it is not a particularly investible market yet.
It was the return of volatility this summer partly emanating from China that brought this truth home to Asia’s long-term capital allocators. They are facing the prospect of rising rates after years of quantitative easing and volatility suppression. China’s emergence and divergent global monetary policy has meant institutions have had to adjust their macro frameworks before the nitty-gritty of asset allocation.
It has brought home the fact that the traditional model of strategic asset allocation set years in advance is becoming outmoded. Our survey of the largest 300 asset owners in Asia Pacific illustrated how flexible these long-term investors have become, more willing to outsource as they ramp up exposures to global markets and alternatives (see page 12). They are as willing to invest directly or to co-invest with general partners and peers as they are to adopt a fund-of-funds approach. In other words, they are becoming more flexible. It demonstrates a growing maturity and sophistication.
But that is not to suggest quantitative easing deserves plaudits for this welcome development. QE has consistently failed to inspire economic revival, in part due to post-crisis regulatory restrictions that have prevented banks from playing their traditional role in driving recovery. If anything QE has proved deflationary (see page 10). The positive is Asian asset owners are prioritising skill over market beta as they target alpha in areas of the markets they are unfamiliar with. Asset managers should finally feel the sun on their backs as the big thaw begins.
04 On the move
M&G not planning to replace Hendry; Pioneer targets Asia acceleration; Thai SSO promotes CIO from within; BNY Mellon looks for Asia CEO; England joins State Street for AM sales; Lam appointed wealth head at Manulife
08 Regulatory Roundup
Is HK importing A-share volatility?
Managers debate whether Hong Kong’s stock market has become beholden to the immaturities of trading mainland China
10 Data Centre: Questioning QE
Consensus seems to be the Fed was right to keep rates on hold. But there is evidence to suggest quantitative easing is not supportive of the economy and is, in fact, deflationary
12 Asset Owners
AI 300 survey
We dispel 10 things that you thought you knew about Asian institutions, but didn’t
18 China Global Investment Forum: Panellists agree to disagree on the best ways to gain exposure to international securities
22 Korea Institutional Investment Forum: NPS seeks help from external managers, while asset owners debate outsourcing and alternatives
26 Future Fund doubles cash position; China Life to issue mandates; Teachers’ Pension ramps up risk; Ontario Teachers plants flag, India institutional opportunity on the rise
Japan’s decision to join the ARFP passport scheme was overshadowed by Singapore’s decision to withdraw from it
30 Q&A: Jaye Chiu, head of investment, EFG Asset Management (HK)
32 BEA Union ties up with Tianhong; Deutsche AWM lures Citi team head; Aberdeen breaks ground with WFOE; Repkow launches wealth platform
34 Fund Managers
Nextgen private equity
We identify a new breed of general managers who are finding fresh ways to bring value to companies
40 Multi-asset investing
Setting a strategic allocation years ahead is challenged in an environment of low returns and market uncertainty
44 No-man’s land
A period of permanent gloom seems to have descended over commodity hedge fund managers
48 ‘Learn to love Taiwan’
Foreign players have new rules to contend with if they want to market locally
50 Q&A: Adam Wheeler, head of Asia Pacific private credit, Babson Capital Management
56 Korea Awards: Photos from AsianInvestor’s fifth annual asset management awards ceremony in Seoul
58 China Universal brand-builds in Europe; CLSA strategist lambasts BOJ governor; MRF scheme for London; SFC urged to lower ETF approval times; Principal eyes WFOE; E Fund wins QFLP permit
Troublemakers: The Most Dangerous Trade: How short sellers uncover fraud, keep markets honest, and make and lose billions
By Richard Teitelbaum