The seemingly never-ending rollercoaster for economies and markets has sharpened the focus of the region’s leading asset owners on the need for long-term capital growth and portfolio diversification.
To achieve these two goals this year, there appears to be a preference among investors for listed securities in Asia and private market assets in North America. At the same time, the influence of technology as well as environmental, social and governance (ESG) factors is stronger than ever, both in terms of target assets and the investment process.
This is all based on the views of 105 senior investment executives from sovereign wealth funds, government entities, insurance companies, public and private pension funds, endowments, private banks and other asset owners across the Asia Pacific region.
They shared these insights as part of a survey by AsianInvestor, in collaboration with S&P DJI, conducted between March and April 2021, covering Hong Kong, Taiwan, Australia, South Korea, Japan, Singapore, Thailand, Malaysia, Indonesia, the Philippines and India.
Key takeaways from the survey
- Respondents believe public equities will see the greatest increase in exposure (in percentage terms) in portfolios in 2021.
- Around a quarter of respondents believe ESG as an investment theme will offer the highest risk-adjusted returns in 2021.
- Incorporating ESG factors via additional data and analytical tools is the most appealing way for investors to enhance returns as they emerge from Covid-19.
- Respondents said there is either a “high” possibility (13%) they will use more passive strategies in the next six to 12 months, or a “medium” chance (45%) they will do so.
- The biggest portfolio risk for respondents is rising rates and inflation (36%), followed by uncertainty over liquidity (21%).
- Conducting virtual due diligence is still the preferred approach this year when outsourcing to external managers, at 45%, with just over a quarter (27%) of respondents confirming they have no intention to add any new external managers.
Broadly, the consensus tallies with the relatively robust and fast recovery that S&P DJI sees as a driving theme for Asia, certainly compared with other parts of the world.
“This has been supported by government stimulus, accommodative monetary policy and large-scale investments. The recovery has been the key influence on rates, equity markets and valuations across the spectrum of asset classes,” said Tianyin Cheng, senior director, strategy indices at S&P DJI.