June 30, 2016 Stamford, CT USA – Asian institutions are diversifying portfolios and seeking new sources of yield by shifting assets to more narrowly focused investment strategies. The four firms named Greenwich Associates 2016 Leaders in Asian Institutional Investment Management Service Quality — BlackRock, Goldman Sachs Asset Management, J.P. Morgan Asset Management, and Wellington Management—are helping institutions achieve these goals by providing both high-level advice and the specialized investment products needed to implement these strategies. 

A new Greenwich Associates report, Specialized Strategies Drive Demand for External Managers, announcing the 2016 Greenwich Quality Leaders shows that, as recently as 2009, Asian institutions had 40% of total assets invested in domestic bonds.  Institutions have made a concerted effort since then to add a diversified mix to their portfolios. Today many are moving past global equities and shifting assets into more narrowly focused strategies run by specialist managers viewed as having greater potential to generate yield. They are showing more appetite for credit strategies and for a growing list of approaches ranging from regional strategies to multi-asset and unconstrained mandates. 

As they implement these new approaches, institutions in Asia—like those in the rest of the world—are looking for external advice and assistance.  “All four 2016 Greenwich Quality Leaders boast both high-level advisory capabilities and credibility as providers of specialist strategies,” says Greenwich Associates Managing Director Markus Ohlig. 

The new Greenwich Report shows that Asian insurance companies represent a particularly appealing growth prospect for the 2016 Greenwich Quality Leaders and all asset managers competing in the region.

Alternative Investments

Currently, most assets invested in alternative asset classes in Asia come from 20–30 sovereign funds and other large institutions that account for the vast bulk of the regions’ institutional assets. However, as investors across the region seek out new sources of return and diversification, these investors will be joined by others that are still large in terms of absolute assets, but are too small to take on the task of running alternative asset classes internally. This will create a significant opportunity for managers in private equity, infrastructure, commodities, real estate, and hedge funds. 

In all likelihood, it will take three to four years for demand from this expanded group of Asian institutions to materialize. Many institutions still lack familiarity and deep understanding of the strategies. 

“Smart alternative managers have already kicked off marketing and sales strategies aimed at educating these institutions about how they should be approaching alternatives and the role these asset classes can play in an institutional portfolio,” says Greenwich Associates consultant Jivan Sidhu.