February's global equity market correction could boost demand among Asia-Pacific investors for relatively complex multiasset strategies, market veterans said.
With the strong returns from traditional equity and fixed-income beta following the financial crisis "unlikely to be replicated" going forward, asset owners increasingly are focusing on dynamic and tactical asset allocation, and other return streams to cope with the less generous environment they see coming now, said Simon Coxeter, a Singapore-based principal with Mercer's hedge fund and equity boutiques, responsible for evaluating multiasset and equity strategies.
Asset owners are looking for managers "who can bring a lot more tools to the table to achieve investment objectives," and unlock additional sources of return by being more dynamic, agreed Erik Knutzen, chief investment officer, multiasset class portfolios with New York-based Neuberger Berman.
Nicholas Hadow, chairman of the Investment Management Association of Singapore, at a late January briefing on the outlook for the industry in 2018, called multiasset mandates the biggest opportunity money managers in the region anticipate this year.
An IMAS survey of more than 100 money managers with operations in Singapore showed 54% of respondents citing multiasset strategies as the coming year's "top strategy of choice," besting the runner-up — ESG-focused strategies — by more than 13 percentage points.
That promises a continuation of the trend seen during the previous year. Broadridge Financial Solutions, a New York-based fintech provider that tracks institutional allocations globally, found managers reporting roughly $8 billion in multiasset strategy inflows from Asia-Pacific investors for the six months ended Sept. 30, said Yoon Ng, Broadridge's Singapore-based director, Asia global market intelligence.
Those inflows ended a seven-quarter stretch of net outflows, she said.
More recent signs of accelerating demand include a request for proposals from Manila's Government Service Insurance System, the $20 billion pension fund for Philippine government employees, issued in November for two multiasset managers to oversee roughly $400 million each. A GSIS spokesman couldn't immediately be reached for comment.
Market veterans said the bulk of flows from Asia-Pacific investors continue to head to more traditional multiasset strategies that avoid the use of esoteric instruments deploying derivatives or leverage.
Mercer has long urged asset owners to consider "idiosyncratic" strategies less reliant on traditional beta return streams, and Mr. Coxeter called the recent global equity market sell-off — sparked by Wall Street's stumble in February — an illustration of the vulnerabilities Mercer is looking to help clients address.