AsianInvestor's Top 10: Asset owner themes of 2022
The past 12 months were incredibly eventful for investors. Inflation soared, interest rates climbed in the developed world and geopolitical tensions between countries increased even as stocks and bonds tumbled.
The chief executive of the Hong Kong Monetary Exchange - the de facto central bank of Hong Kong - echoed the sentiment of institutional investors around the world when he said that given the torrid market conditions of 2022, no asset class provided a place to hide.
Still, asset allocators continue to invest with an eye on long-term gains, and the hunt for opportunities amid market volatility continues.
From data centres and private credit to ESG, senior executive hiring and portfolio management, AsianInvestor showcase the topics - and stories - that had everyone talking in the past 12 months.
1. Family office investing
Interest in how and what family offices are investing in has soared in recent years. JLin LLC, the family office of professional basketball player Jeremy Lin, discussed how wealthy families can begin impact investing. Think about the things that matter most to identify opportunities, was one of the key messages.
2. Digital assets
The Abu Dhabi Investment Authority talked about how it views traditional infrastructure assets versus digital infrastructure assets such as data centres and fibre-optic telecommunication networks. Digital assets are expected to be in favour among asset owners in 2023 as e-commerce continues to make big strides, especially in Asia.
3. ESG
This was one of the biggest topics of discussion for asset owners. Malaysian sovereign wealth fund Khazanah Nasional Berhad and Canada’s Ontario Municipal Employees Retirement System flagged an important issue that plagues all asset owners seeking to incorporate ESG in their investments – ratings scores from external service providers can be vastly differently, defeating the ability to compare investments based on ESG. Meanwhile, Sun Life's regional CIO noted that quantifying ESG factors is tough, and making judgement calls on those factors even more so.
4. Real estate
The real estate arm of Caisse de dépôt et placement du Québec (CDPQ) is ambitious about investing in Asia, with a senior executive saying the Canadian pension fund wants to double its allocation to Asian real estate. The fund views the region’s real estate as a great diversifier with strong fundamentals. Many institutional investors continue to be keen on Asian properties.
5. Private credit
Asia's private credit markets have also seen a surge in foreign asset owner interest. Canada Pension Plan Investment Board (CPPIB) highlighted what it found attractive in these markets, echoing the sentiment of other institutional investors in search of diversification in uncertain markets.
6. Mergers and acquisitions
Against a backdrop of challenging markets, Australia's pension funds kept on exploring merger and acquisition opportunities, partly to acquire scale and improve investment options. HESTA and Mercy Super were the latest to announce a merger in December. With market turbulence expected to continue, expect more efficiency-improving measures among pension funds, including M&As.
7. Hiring
One of our biggest and exclusive people moves was that of Axa Hong Kong’s CIO Richard Chan joining New World Development’s FTLife as chief investment and asset and liability officer. Some other big hiring stories in the industry included Korea Investment Corporation's new head of real estate, Dutch pension fund APG naming an Asia CEO and Prudential naming a group CIO in Singapore.
8. Portfolio management
With markets challenging the expertise of even the most seasoned asset owner, the question of whether the usual 60:40 allocation of stocks and bonds makes sense in the rapidly changing investment landscape is inevitable. So is traditional portfolio construction a thing of the past? Future Fund thinks so, and CIO Craig Thorburn gives us good reasons why in this piece. In these turbulent times, asset owners certainly need to think differently about managing money.
9. News analysis
Did anyone imagine investors would be considering the impact of a conflict zone in Europe in 2022? But here we are. The Russia-Ukraine conflict made global headlines, and the resulting sanctions on Russia's financial system left investors speculating whether it would boost China's drive to internationalise its currency. Read our analysis here.
10. Fund regulations
One of the big stories for the fund management industry was the introduction of a new disclosure regime for ESG funds, which are facing increasing regulations across the world even as their popularity grows. These will affect both institutional and retail investors and as the deadline of January 1, 2023, approached, discussions around the topic grew more frantic. Watch this space for more developments.
