Cambridge Associates, investment consultant to top university endowments in the U.S., is counting on its alternatives expertise to help it win discretionary outsourcing mandates in an Asian market more prone to internal management.
With its May 28 announcement of a Singapore license to provide “discretionary management” services, Cambridge joined a small subset of providers in the fast-growing outsourced CIO market in the U.S. that have planted their flags in Asia as well — joining competitors such as Mercer and Russell Investments, and a few global multiasset-class money managers.
In a June 3 interview, Alvin Tay, managing director of the Boston-based firm's Singapore office, said while talks with institutional investors in Asia have revealed some interest in broader discretionary service offerings, the highest level of interest is in alternative assets. Addressing that demand should prove to be the firm's most immediate business opportunity, he said.
Industry veterans say an approach targeted on alternatives makes sense, as managers in Asia looking to assume discretionary oversight of institutional investor portfolios, or significant portions of them, face an uphill battle. The biggest obstacle: the thin ranks in the region of the small to midsize university endowments and corporate retirement plans that, in the U.S., have been outsourcing oversight of their portfolios in growing numbers.
That U.S. demand has supported a growing number of specialist outsourced CIO firms, built around an investment team for a single institution that broke away to offer its services to third-party clients. Firms such as Investure LLC, Strategic Investment Group, Makena Capital Management LLC and Morgan Creek Capital Management LLC are nowhere to be found in Asia.
By contrast, the institutional investor landscape in Asia is dominated by public pools — including sovereign wealth funds and national pension plans — that have been moving to bring as much of the management of their portfolios in-house as possible. Sophisticated assets owners are more likely to be building internal capabilities, a trend working against the kind of hands-off approach an outsourced mandate would entail, said Ken Yap, Singapore-based director of Cerulli Associates Asia Pte Ltd.