October 4, 2022 | Stamford, CT — In a year of accelerating inflation, mounting concerns about market volatility and continued, pandemic-related disruptions to due diligence and other core business practices, asset owners in Asia are gravitating to established investment managers in traditional asset classes who can deliver stability, along with top-notch client service and advice. 

At the same time, asset owners across the region are seeking to hire non-traditional managers of any size—as long as they can impress with expertise in the specific alternative asset classes institutions are targeting for their portfolios.

Institutions’ preference for large managers with proven track records for performance and client service is playing to the strength of global firms like Allianz Global Investors and PIMCO, the 2022 Greenwich Leaders in Overall Asian Institutional Investment Management Quality. 

“These firms win plaudits from clients across Asia for both the intensity and the quality of their client service, and for the effectiveness of the advice they provide on macro issues, portfolio construction and asset allocation across the market cycle,” says Parijat Banerjee, Head of Investment Management APAC at Coalition Greenwich and author of Established Managers and Alternatives Experts Win Institutional Mandates in Asia.

Big investment management organizations devoting significant resources to environmental, social and governance strategies are benefiting from a spike in demand for ESG this year. As more Asian institutions adopt ESG criteria, portfolio implementation practices are evolving quickly. 

“Rather than giving out dedicated ESG mandates, Asian institutions are looking to see how managers have integrated ESG into their core investment processes across strategies,” says Arifur Rahman, Senior Manager at Coalition Greenwich and report co-author, adding that certain large management organizations like Allianz Global Investors have been leaders in this type of ESG integration.

Throughout Asia, institutions’ search for badly needed sources of yield are leading them to alternative asset classes. Private equity now makes up about 4% of Asian institutional assets and over the next three years, 43% of Asian institutions plan to increase allocations to the asset class. About 47% of institutions expect to make large increases to private debt allocations, and 46% plan to boost allocations to infrastructure equity. 

In 2021, a combination of strong equity performance, anticipation of interest-rate hikes and voracious demand for alternative asset classes helped reduce institutional fixed-income allocations and depress demand for the services of fixed-income managers competing in Asia.

“The situation for fixed-income managers has changed significantly over the past six months,” says Parijat Banerjee. “Based on conversations with clients, we think 2021 might have marked a low point for fixed-income allocations, and we expect a much more favorable environment for fixed-income managers ahead.”