Absolute return, megatrends key focus for Asian investors

A focus on absolute return and ‘megatrends’ will be dominant themes in the coming 12 months, according to an institutional investor survey* conducted this month by Dutch fund manager Robeco.

In response to a question about what will be the most dominant trends, the most popular was a focus on absolute return (with 36% citing it) and second came megatrends (29%), with ‘conservative approach (low volatility)’ coming third, well behind the others with 16%.

“The focus on absolute return and megatrends is not surprising given the state of the markets,” says Henk Grootveld, co-portfolio manager of Rolinco in the Netherlands, which invests in thematic equity strategies offered by Robeco and fund manager SAM.

Megatrends are long-term, global, macro themes such as aging populations, climate change, the rise of the middle class and scarcity of natural resources.

Asked which themes they plan to integrate into their investment portfolios, investors’ most popular response was ‘the rise of the middle class in Asia’, referring to the opportunities likely to emerge from the growing spending power of consumers in the region. Three-quarters of respondents ranked this as either an important or very important trend for the next 12 months.

The second most popular answer was 'scarcity of natural resources', with 65% ranking this as important or very important. This was reflected by the highest proportion of investors picking ‘natural resources’ as the industry likely to offer the most interesting investment opportunities in the coming 12 months.

Grootveld agrees that this sector is appealing. “With an increasingly tightened supply-demand balance, prices for natural resources are set to rise,” he says. “For example, despite the economic slowdown in Europe and the US, oil prices are still above $100 a barrel, which tells me the scarcity factor is having an effect."

“Not only is demand driving oil prices, but even more so the lack of supply,” he adds. “So we definitely expect solid returns from the natural resources sector.”

The least popular was ‘climate change’, with only 24% of respondents ranking it as an important or very important trend for portfolio allocation. This may reflect the low priority for this issue in Asia, where investors tend to be focused on growth rather than environmental concerns – particularly in times of financial market turmoil.

* The survey was conducted in conjunction with AsianInvestor in early October, and the full results, charts and write-up will appear in the forthcoming November issue of the magazine.