Thursday, July 26, 2018 Stamford, CT USA — Institutional assets available to asset management firms in Asia topped $3 trillion for the first time this year as central banks, large pension funds and other institutional investors continued diversifying their portfolios and outsourcing assets. 

The good news for asset managers does not end there. Not only are Asian institutions outsourcing more and hiring more external managers, they are allocating these assets to higher-risk asset classes with higher fees and better margins for managers. 

Among the biggest beneficiaries of these favorable market conditions are Allianz Global Investors, Invesco and PIMCO — the 2018 Greenwich Quality Leaders in Overall Asian Institutional Investment Management.  “These three managers have made a firm commitment to this market and to providing institutional clients here with the highest quality investment platforms and client service,” says Greenwich Associates Managing Director Markus Ohlig. “As a result, they have built strong relationships with key Asian institutions that are now paying off.”

Asset Managers Benefit from Growing Risk Appetite
As recently as 2010, fixed income made up approximately three-quarters of overall Asian institutional assets. In 2018, fixed income represents just 46%. Institutions have made dramatic cuts in domestic fixed income, which declined to an average 26% of total assets in 2018 from 36% in 2010. These assets are being reinvested in international equities, which increased to 26% of total assets in 2018 from 8% in 2010. 

Largely as a result of these shifts as well as strong equity market performance, the total amount of outsourced assets increased 13% last year to more than $3 trillion. That growth has fueled an increase in new manager hires in alternative asset classes and real estate, even as hiring in fixed income has plateaued. 

While institutions continue to move into passive strategies for core investments, the impact of that shift for managers as a group is being offset somewhat by institutions’ increasing appetite for higher-risk, specialty and alternative asset classes that carry significantly higher fees. 

“These allocation shifts play to the strengths of firms like AGI, Invesco and PIMCO, all of which are able to deploy some combination of investment prowess, access to higher-risk or specialty products and value-added client service to help institutions plan, execute and manage these new investments,” says Greenwich Associates consultant Parijat Banerjee. 

Click here for the Greenwich Report and list of 2018 Quality Leaders in Overall Asian Institutional Investment Management.