European asset owners have been the prime opportunity set for managers of multiasset strategies in the past decade, but increasingly investors based in the Asia-Pacific region are becoming a target-rich audience as well.
The Asia-Pacific region is “one of the fastest growing areas of the business,” said Garth Taljard, head of multiasset management for London-based Schroder Investment Management Ltd.
Schroder’s Asia-Pacific multiasset business has quadrupled over the past five years, twice the pace of growth for the firm’s overall $110 billion multiasset book of business, Mr. Taljard said.
The degree to which Asia’s relatively young institutional investor universe has been open to adopting harder-to-benchmark multiasset strategies in the past three to four years has been “one of the big surprise success stories in the region,” said Daniel Celeghin, a Hong Kong-based principal with Casey Quirk by Deloitte and head of wealth management strategy Asia-Pacific.
Mr. Celeghin attributed that success to a “confluence of market events” — specifically, the impact of historically low sovereign bond yields globally on Asian investors’ fixed income-dominated portfolios — and “some good salesmanship.”
That has left Asia’s fast-growing pools of institutional capital — many of which were set up within the past decade — looking to multiasset managers to provide either “an alternative to fixed income,” or to serve as a benchmark or act as a partner for their broader asset allocation decisions, Mr. Celeghin said.
There’s “growing interest in Asia” in partnerships with multiasset managers that can offer extensive research capabilities, said Thomas Poullaouec, a Hong Kong-based managing director with State Street Global Advisors and head of strategy and research-Asia-Pacific for the firm’s investment solutions group.
A number of institutional investors in the region that have set up their own asset allocation teams don’t have the firepower yet to “develop their own metrics,” Mr. Poullaouec said. While a mandate, governed by an investment management agreement remains the foundation of such relationships, SSgA then works “as an extension of their team,” on research that will inform their evolving asset allocation process, he said.
Mr. Poullaouec said SSgA believes it can support 10 such partnership relationships globally and currently has a few in Asia. He declined to provide details.
A number of industry veterans cited demand from Chinese investors as an opportunity, reflecting what looks to be the start of a long stretch of explosive growth in that country’s retirement-related pools of capital.
When institutional clients in that market go overseas, they often “embrace multiasset to help them navigate during their early days, said Michael Kelly, global head, multiasset, with New York-based PineBridge Investments, adding that China is a rapidly growing portion of his firm’s $13.4 billion multiasset business.
In China, a number of asset owners are looking to invest globally for the first time, and multiasset products — in a partnership arrangement that includes knowledge transfer — is a natural fit, said Schroder’s Mr. Taljard.
Elsewhere, multiasset strategies offering positive absolute returns in excess of cash and bonds, with limited risk compared to equities, are “very popular in Asia,” Mr. Taljard said.
Meanwhile, managers of strategies that seek to anticipate big changes in risk regimes likewise say they’re finding investors in Asia to be receptive.
Jeffrey L. Knight, global head of investment solutions and co-head of global asset allocation with Boston-based Columbia Threadneedle Investments, said the region gave his firm’s $1.2 billion Columbia Adaptive Risk Allocation strategy its first big institutional mandate this year — a $500 million allocation by a South Korean asset owner — ahead of its three-year anniversary. He declined to name the client.
Mr. Knight said he’s found South Korea’s investment culture to be relatively open to embracing unconventional strategies such as CARA, which tailors its asset allocation and its use of leverage to four different market states ranging from capital preservation mode to bullish. Once CARA reaches a three-year track record later this year, Mr. Knight said he’s optimistic the strategy can attract more institutional allocations, both in Asia and globally.
Big institutional investors in the region handing out big mandates to multiasset managers in recent years included Taiwan’s $104 billion Bureau of Labor Funds, Taipei, which awarded $800 million apiece in April to J.P. Morgan Asset Management, Allianz Global Investors, Deutsche Asset Management and PineBridge.
Just more than a year earlier, sources confirmed that China Life Insurance Co. extended multiasset mandates to Goldman Sachs Asset Management, J.P. Morgan, Neuberger Berman Group, Schroder Investment Management and SSgA.