Demand in Asia for equity strategies focused on low-beta stocks should pick up during the remainder of 2013 following a year or two of study by institutional investors in the region, market veterans say.
One measure of whether those strategies — which aim to match or exceed market-capitalization-weighted index returns with a fraction of the volatility — are becoming more mainstream will be how well they fare in global equity searches by big institutional investors in key markets such as Japan and Korea.
Institutional sales executives in the region say bulge-bracket institutional investors in Japan — including the ¥112 trillion ($1.182 trillion) Government Pension Investment Fund, the ¥10 trillion National Pension Association and the ¥8 trillion Federation of National Public Service Personnel Mutual Aid Associations — are poised to conclude searches for global equity managers in the coming months.
In a telephone interview, Tokihiko Shimizu, director-general of the GPIF's research department, while declining to discuss timing, said his team is engaged in an in-depth study of low-volatility and other “smart beta” strategies, to gauge the potential for diversifying the 80% of the pension fund's more than US$300 billion in domestic and international equities allocated to passive market-cap-weighted index strategies.
A National Pension Association spokesman, meanwhile, said the NPA is also studying managed volatility strategies, but declined to say whether allocations could eventually follow.
A spokesman for the Federation of National Public Service Personnel Mutual Aid Associations declined to comment.