ASIA - Asian institutional investors have been questioning the use of external managers in their US$5trn pots after their internal portfolios largely outperformed those of outside managers over the past year.
A survey of Asian institutions, excluding Japan, by Greenwich Associates found that a mere 15% plan to outsource additional overseas assets in the coming years, while 18% expect to increase the amount of assets managed externally in their home countries.
This is a sharp turn-around from last year's survey, which found that 92% of institutions planned to increase their use of external managers for international assets, and 45% planned an increase for domestic assets, Greenwich said.
Greenwich consultant Markus Ohlig said: "Due to their lack of equity exposure and the nature of their fixed-income holdings, internal portfolios held up relatively well during the market downturn. By contrast, Asian institutions have been much more likely to outsource equity investments, and as a result, they were much more likely to be disappointed by the performance of their external managers."
Instead, these investors are planning to expand their internal capabilities. Over 54% said they plan to increase the types of strategies they manage in-house, both passive and active.
Meanwhile, the risk aversion evident in the investment activities of schemes around the world can also be seen in Asia, with many slowing down their plans to expand into alternative assets.
The number of investors now planning to increase their private equity exposure, for example, has halved from last year - 25% versus 50% in 2008, Greenwich reported. The proportion of those looking to increase their hedge fund exposure dropped to 42% from 29%; real estate, 15% from 38% last year.
Investors have also started to shore up their cash holdings. This year, one in five institutions said they planned to increase their allocation to cash versus a mere 6% last year.
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