Asia Pacific investors prefer active thematic investing, seek external experts

Asian institutional investors and family offices are more keen on active thematic investing in their equity portfolios compared to their European counterparts, a recent survey found.

Furthermore, 46% of these investors intend to increase the number of external managers they use for thematic strategies over the next 12 months.

The latest thematic investing report by Vontobel surveyed 48 institutional investors and family offices across Singapore, Hong Kong, New Zealand, Australia, and Thailand.

“The growing appetite for thematic strategies has raised awareness among Asian investors for greater expertise from third-party specialists,” said Benny Gay, Vontobel’s Asia head of intermediary clients.

The report found that 89% of these investors have started to adopt a thematic approach in their portfolios as of August, while 75% planned to increase their thematic allocations over the next three years.

It noted that the increasing global demand for sustainable funds has been a main driving force for thematic investing over the past 12 months.

A senior investment manager at a Greater China-based life insurance company told AsianInvestor recently that when looking at long-term investment strategies in internal meetings, discussions on potentially outperforming themes, such as in sustainable investing, are quite common.

Such approaches can be both bottom-up or top-down, he noted.

ACTIVE PLAYERS

Among investors surveyed, 57% preferred to actively manage their thematic investing portfolios, while only 7% were taking a largely passive approach. This is in contrast to European investors’ more balanced approach, with the majority using a mix of both styles, and only 29% pursuing active management.

For example, Korea’s Public Officials Benefit Association (Poba), which is heavy on alternative investments in developed markets, has a sustaining interest in niche sectors such as data centres, life sciences, and clean energy.

The primary approach is to actively manage, as Poba wants to ensure control over the investment process to meet its specific objectives, Chief Investment Officer Jang Dong-hun told AsianInvestor recently.  

To strengthen capacity and expertise, Poba has been proactively establishing co-investments with external managers and other asset owners. 

Likewise, Sun Life Financial Asia, the Asian arm of Canadian insurer Sun Life, said it’s taking a thematic approach to diversify its Chinese equities exposure to carbon neutrality, including clean energy and electric vehicles, where it sees strong and sustained growth and government support, along with fewer risks. The insurer is using both active and passive strategies.

Meanwhile, Natalia Mu, expert product specialist on equities at AXA Investment Managers Asia, confirms the company’s active strategy. “We believe that active management plays a crucial part in adding value when investing in long-term thematic opportunities,” she said.

“We seek to identify the companies that are best placed to benefit from a specific long-term growth theme, rather than simply investing in a basket of stocks exposed to that theme,” Wu added.

The Vontobel report found that climate change; environmental, social and governance (ESG); as well as new technologies including artificial intelligence (AI), robotics, and 5G were all front-of-mind themes for Asian investors.

By contrast, its recent European thematic investing report pinpointed resource scarcity as the most popular theme.