Institutional investors in Asia, excluding Japan, are adding risk in their portfolios even as their counterparts in the U.S., Europe and Japan move in the opposite direction, according to a recent survey by Greenwich Associates.
The push into riskier assets and more complex portfolio structures could prove a challenge in a market where roughly 80% of institutional assets are still managed in-house and only one in 10 institutional investors consults with external firms about risk management, according to a report on the survey findings that Greenwich released Thursday.
The survey was based on in-person interviews Greenwich conducted from January through March with 174 of the largest institutional investors in Asia outside of Japan.
According to the survey, over the past two years, allocations to domestic and international fixed income fell by nine percentage points to 27% and six points to 31%, respectively, while allocations to domestic and international equities both doubled, to 10% and 16%, respectively. Meanwhile allocations rose for alternatives, to 10% from 6%, and fell for cash, to 4% from 6%.
Greenwich noted that only 30% of Asian institutional investors use investment consultants, compared with between 85% and 95% in the U.S. and Europe — a discrepancy that could become more meaningful as Asian portfolios become increasingly complex.
In the report, Markus Ohlig, a Greenwich consultant, said “Make no mistake, any institution that is attempting to actively manage its own assets for the purpose of generating alpha is competing directly with asset management companies that are more focused on investing, better equipped and typically staffed with investment professionals who are better paid, and therefore, are often more experienced.”