AsianInvestor's top 5: Asset owner themes of H1
It was a busy first half of 2023 for both financial markets and asset owners. With China emerging from extremely strict pandemic restrictions, there was hope that financial markets would see improvements. There were also expecatations that the US Federal Reserve would pause its cycle of rate hikes, making bonds an attractive asset to add positions.
AsianInvestor's editorial team curated the top developments involving asset owners related to investments and the industry landscape for the first six months of this year.
Fixed income became the asset class of choice
With rising interest rates, bonds came into play in a big way with asset owners in 2023.
After an exceptionally bad 2022 that saw both public bonds and stocks drop steeply, the general expectation was that 2023 ought to see fixed income bounce back as an asset class on the back of rising interest rates.
And it did. Asset owners across the region said they raised allocations to fixed income.
Asia’s life insurance companies' started to reposition bond allocations, while South Korea’s Public Officials Benefit Association (POBA) calibrated its asset allocation strategy to bring in more stable cash flows as it braced for an unpredictable second half.
More recently, the head of Taiwan’s Bureau of Labor Funds revealed how the pension fund turned more aggressive on bonds to adapt its $201 billion portfolio to higher rates.
Private debt became even more appealing
Several asset owners made greater bets on private credit. While private markets have been attractive for a couple of years,rising interest rates helped whet even greater appetite for private credit, along with bonds.
Some family offices told AsianInvestor they were looking at secured credit as well as real assets credit.
Single family office Nan Fung Trinity said it would add positions in private credit and distressed debt, especially through secondary deals.
European asset owners were also looking to scale up their Asian private credit allocations as they continue to diversify investment portfolios and income sources.
Family offices in Hong Kong and Singapore hit the spotlight
The ‘friendly’ competition between Hong Kong and Singapore to become the go-to family office hub of the region intensified over the past six months.
Hong Kong introduced a slew of measures to encourage more wealthy families to set up family offices in the region earlier this year.
Those efforts seem to have paid off: Financial Secretary Paul Chan recently announced that the city will see some of the world’s leading family offices set up shop in Hong Kong, with a lot more in the pipeline.
Yet Singapore has already stolen a march on Hong Kong, with industry observers claiming at least 1,500 family offices were operating in the city state at the end of 2022.
There seems to be no cooling off as a growing number of Indian families, among others, continue to explore setting up family offices in the city-state.
Gold acquired a new sheen
Gold hit the news as its bounced around the $2,000 per troy ounce mark earlier this year, as inflation, a weaker US dollar, worries about the banking sector, and market volatility amid looming recession, made the shiny metal a safe-haven asset once again.
Central bank gold purchases, in particular, had a strong start to 2023.
Singapore’s central bank was one notable buyer, as it added to its gold holdings in the first three months of this year, reinforcing its position as the top institutional buyer of the shiny metal for the quarter.
The Monetary Authority of Singapore's (MAS) gold reserves increased to 7.15 million fine troy ounces at the end of March from 4.94 million troy ounces at the end of December, official monthly reserves data showed.
Central banks in India and China have also been buyers of the precious metal.
Experts said the trend is likely to continue.
China allocations and economic recovery
Investing in China was another big topic of discussion across the first half.
China’s financial markets perked up at the start of the year as the country reopened from harsh COVID-19 pandemic restrictions and a rescue plan for the property sector kicked in.
Since then, geopolitical issues, among other concerns, have kept international asset owners mostly on the sidelines.
In May, reports that the White House was planning to issue rules for American firms on investments in China’s tech sector reminded investors that relations between the US and China continue to be tense.
Meanwhile, Canada-China tensions also grew as five of the largest pension funds in Canada were questioned on their exposure to China by a parliamentary committee of the Canadian government.
Canada's third largest pension fund, Ontario Teachers' Pension Plan, also shuttered its China equity investment team in Hong Kong in April.
