Institutional investors in Asia ex-Japan have made dramatic progress in diversifying their portfolios since the global financial crisis, a trend that should continue to benefit managers of global equities and alternative strategies, a Greenwich Associates survey showed.
The survey of 207 investors in the region, released Wednesday, showed diversification coming at the expense mainly of domestic bond allocations, which plummeted to 18% of the asset-weighted pool of combined assets by the end of 2013, from 40% at the end of 2008.
Over the same period, allocations to international equities tripled to 21%, while allocations to alternatives jumped to 14% from 5%.
In an interview, Abhi Shroff, a Singapore-based managing director with Greenwich Associates, said interviews with 112 of the 207 investors, conducted during the first quarter of 2015, revealed concerns about the prevailing valuations of risk assets but conviction that further diversification was needed to manage risk.
International equities and alternatives look set to garner much of those increased flows, he said.
The survey covered roughly 60 pension funds, 60 insurance companies, 30 government institutions including sovereign wealth funds, 30 endowments and family offices, and 10 central banks, with the remainder accounted for by commercial banks and corporate treasury departments that use external managers.
Among other asset segments, international fixed income rose to 33% by the end of 2013 from 28% at the end of 2008, largely reflecting the reserves of central banks in the region. Domestic equities, meanwhile, edged down to 8% from 10%, while cash dropped to 4% from 8% and “other” held steady at 2%.
The inclusion of a handful of insurance companies for the latest survey, meanwhile, lifted the domestic bond weighting back to 28% at the end of 2014.
Greenwich estimated institutional investors in Asia ex-Japan had combined assets of $12 trillion at the end of 2014, up from $7 trillion at the end of 2010.
A news release on the survey noted the growing sophistication of institutional investors in the region was prompting them to hire a growing number of specialist managers, as opposed to those managing core strategies.
