Five key trends that asset owners talked about in April
April was an interesting month, as the editorial team interviewed a host of significant asset owners to talk about a range of topics from investment strategies and technology to sustainability and decarbonisation.
Here is a roundup of the key trends assets owners discussed with the team over the month.
ARTIFICIAL VERSUS HUMAN
Artificial intelligence (AI) and its multiplying uses within investment management was a big topic of discussion this month among asset owners.
Pension fund giants like State Super acknowledged that AI is driving productivity and efficiency gains across industries, “marking another industrial revolution.”
Others like APG Asset Management, which first began experimenting with AI in 2017, noted that it has a firm belief in the man-machine balance – machines augment human intelligence but there are no plans to fully automate decisions or execute them without human oversight.
"Personally, I prefer the concept of augmented intelligence over artificial intelligence," said Peter Strikwerda, global head of digitalisation and innovation at APG.
"This emphasises a balance where both human and machine capabilities are combined for optimal outcomes, which I believe is where the greatest benefits lie."
Still, all our interviewees noted that AI advancements also present ethical challenges and societal implications. The solution to that could be even more AI tools to combat misinformation and falsehoods.
INFRASTRUCTURE IN DEMAND
Japan’s Government Pension Investment Fund (GPIF) and APG Asset Management in April announced a landmark joint investment programme for infrastructure investments in developed markets.
Global infrastructure projects aimed at advancing digital connectivity, fostering energy transition towards a fossil-free future and spearheading decarbonisation efforts in transportation will be the focus, an APG spokesperson told AsianInvestor.
It showcased the continuing importance of infrastructure for asset owners, as they look to alternatives investing to generate steady and above-average returns.
On a related note, the Dutch pension investor’s asset owner-led infrastructure fund is looking to create strategic alliances with major global partners like NZ Super and Korea's National Pension Service.
By pooling resources with others, APG gains access to larger transactions and exert more influence, ultimately benefiting both parties and strengthening its offerings to its pension fund clients.
SUSTAINABILITY GAINS MORE GROUND
With more asset owners pushing for sustainable investments, it’s no surprise that external managers providing investment services are moving to comply. This is increasingly true in private markets.
“Sustainability is burgeoning in private markets. It's new and it's mixed, some partnerships and GPs are more advanced in their thinking about this…Therefore, GPs must be highly sensitive to these requirements to get their share of our capital longer term,” Mark Konyn, group CIO for AIA, told AsianInvestor.
Another large asset owner, the world’s largest climate finance fund, also talked about its investment approach while making investments.
“Our investments need to have a paradigm shift potential and a climate impact potential. We are able to have a high-risk appetite, as long we can believe there is also high impact,” Henry Gonzalez, deputy executive director and chief investment officer of the Green Climate Fund.
Asia is the fund’s second-largest region of exposure, after Africa.
DECARBONISATION CHALLENGES
Two Singaporean state-owned investors reiterated the case for decarbonisation to AsianInvestor this month.
Energy markets volatility, geopolitical tensions and a host of other factors are prompting some companies and investors to slow the pace of decarbonisation, although there is no going back on the drive to decarbonise in the long term, the CEO of GenZero told AsianInvestor.
GenZero is Singaporean state investor Temasek's decarbonisation investment platform.
Temasek, separately, also affirmed its commitment to decarbonisation, which along with digitalisation, are fundamental trends that will reshape the business and investment landscape.
“We are investors in new emerging technologies and providing risk capital where needed to support these transitions," Steve Howard, vice chairman of sustainability at Temasek, told AsianInvestor.
PRIVATE MARKETS, ACTIVE STRATEGIES
The quest for private market and alpha yielding strategies continues.
Ping An Insurance Group’s CIO Benjamin Deng said he expects healthy long-term performance of its overseas private equity investments as the insurer has full faith in its best-in-class global managers.
The internal rate of return (IRR) of Ping An’s overseas private equity investments averages about 15% each year.
Alternative investments are also gaining momentum among institutional investors in India. “We are seeing good traction in the alternative investment funds (AIF) in India and the quantum of funds that they are mobilising and deploying," said Ajit Banerjee, CIO of Shriram Life Insurance.
Japan’s Noritz Corporate Pension Fund will also focus on active strategies and hedge funds, although mainly due to concerns over a ‘bubble-like’ scenario in parts of financial markets.
“From now on, I prefer to invest in actively managed investment vehicles because based on my outlook for the equity market, maybe there could soon be a great price correction. At that time, stock picking could help achieve great performance,” CEO and CIO Kiyoshi Iwashina said.