State of Wisconsin Investment Board, Madison, is on the lookout for Asia-focused fund managers, but is taking a careful approach to hiring, said Derek Drummond, head of strategy for the funds alpha team.
SWIB, which managed $156 billion as of Dec. 31, has emerging markets exposure that separates China and ex-China assets, Drummond said on Nov. 12 in a panel discussion at the iConnections Global Alts Asia event in Singapore.
“We're always allocated here. We're always active in the space. So we are always looking for new managers,” he said.
The fund could increase its emerging markets exposure, but the team has to think through where and how it will increase it. There are new rollouts and a variety of managers to choose from, but the fund needs additional premium and noncorrelation from its Asian investments compared to its U.S. exposure, Drummond said.
There is volatility in Asia, “which is the fuel for alpha,” he said. “That doesn’t mean that by definition (there is) more alpha, but you can see the opportunity to generate alpha,” he said.
He also noted that there is increased interest in Japanese assets, but the team is being careful about the quality of investment talent that has emerged in the country.
“I met with a platform that’s hiring something like 20 Japan PMs… (But the question is) are they really good talent? I don’t know yet. So you have to be a little bit careful, even though you’re getting really interested, it is really hard finding actual talent that’s run money there,” he said.
At the C$452 billion ($323.9 billion) Caisse de dépôt et placement du Québec, Montreal, 85% of its Asia-Pacific private investments are managed internally, and 15% is invested through managers that specialize in areas that the fund does not have expertise in.
The fund has around $45 billion invested in Asia-Pacific and opened its Singapore office as a regional hub in 2014.
“We don't have boots on the ground in every single market that we invest in. We don't have the most localized knowledge. So that is when that 15% comes in,” Leong Wai Leng, managing director and regional head of Asia-Pacific for CDPQ Global said in a separate panel discussion.
“If the (general partner) is able to add value either in the form of a different strategy, local knowledge, (or) local network — that's where we tend to gravitate towards using an extra GP,” said Leong, who is based in Singapore.
The fund also has offices in India and Australia, mainly to manage its real assets portfolio, including infrastructure, she said.
In addition, CDPQ does not actively hedge its portfolio, because its base currency is Canadian dollars rather than U.S. dollars.
“Within Asia, you will see quite a fair bit of Asian currencies moving together with commodities. And no surprise, the Canadian currency also moves alongside the commodity play. So as a result of that, our hedging strategy is rather different,” she said.
