What do Asian asset owners look for when selecting external managers?
Consistent returns is a top priority for Asian asset owners when it comes to choosing asset managers. Information delivered, expertise in new asset classes, and research approach also matter in the selection, a new Asset Owner Insights (AOI) report reveals.
More than half (66%) of the surveyed asset owners told AsianInvestor that asset managers’ consistent performance, as well as their performance against the benchmark, are top factors in the selection of external managers. The quality of reports and the information delivered by the asset managers also affect asset owners’ decision making.
The use of artificial intelligence (AI) and other technologies is the least important factor when shortlisting managers, the survey found.
The AOI survey collected 70 asset owners’ views across Asia Pacific (Apac), representing a total of $5.35 trillion in assets under management (AUM), as of end September.
QUALITY OVER QUANTITY
In general, Asian markets lag behind US and European countries in information disclosure, including Environmental, Social & Governance (ESG) data provisions. Incidentally, nearly 50% of the surveyed asset owners highly value how asset managers deliver their reports and information.
Anthony Petalas, portfolio manager at UK pension pool Border to Coast Pensions Partnership, told AsianInvestor that selecting a manager in China requires extra effort, in part due to the need in monitoring the quality of the manager’s ESG disclosures.
“ESG integration is not about the size of the company. Indeed, a big asset manager might have all the resources at their disposal, but our focus is on the underlying investment teams we are partnering with. We want to understand the team’s philosophy and thinking around ESG, as this gives [us] greater confidence in true integration,” Petalas said.
The main difference in ESG integration between developed and emerging markets is in the quality of data and disclosures, he said.
“Third-party data screens are an important part of the process. However, as fundamental investors we don't want to solely rely on data for our analysis. We believe that a more important contributing factor is the underlying research conducted by the investment teams that can uncover hidden risks or opportunities that may not be reflected in the underlying third-party data,” he added.
In terms of areas that need extra work and enhancement, nearly 27% of surveyed asset owners are calling for improvements in the design of investment strategies from asset managers.
Asset owners also believe that better investment product design and portfolio construction, risk management and governance, and technology and data capabilities are all helpful in enhancing a third-party asset manager’s efficiency.
Meanwhile, new investment vehicle offerings and new active investment strategies are key focuses for asset managers when it comes to product development efforts, according to the latest Cerulli research report.
“New and unique ideas that fit into a client’s portfolio are more likely to succeed when supported by demographic shifts in the industry,” Matthew Apkarian, senior analyst at Cerulli, noted in the report. “Alignment of third-party resource data and data from a firm’s true investor base will help product organizations understand whether they can break into niche product areas and share classes,” Apkarian added, noting that using various resources and methodologies to gather data and understand directional shifts in product use will give product organisations advantages when managing their existing and future product lines.
The survey was conducted by Asset Owner Insights, AsianInvestor's proprietary data platform. More exclusive stories from AOI:
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