ASIA - Asian institutional investors outside of Japan are looking to boost returns by investing more heavily in liquid alternatives, high yield debt and emerging markets while Japanese investors are looking for non-domestic opportunities, a new survey finds.
Pyramis Global Advisors surveyed 95 institutional investors in Japan, South Korea, Taiwan, Hong Kong, Singapore and China which combined manage over $1.1trn in assets.
The firm found some 40% of investors in Asia ex-Japan are looking to increase their allocations to liquid alternatives like long/short equity and global macro strategies. An equal amount plan to invest in more aggressive sub-asset class categories like high yield debt and emerging markets.
In Japan, nearly one-third of investors are diversifying outside of their home-country and nearly a quarter plan to increase risk within an asset class by, for example, moving from passive to active investments. Another quarter will follow in the rest of Asia's footsteps and increase their use of liquid alternatives.
The 2011 Pyramis Asian Pulse Poll found that investors' top three concerns are the low-return environment, risk management and volatility.
Chief investment officer Young Chin said: "There is little doubt the financial crisis of 2008-2009, and more recently the Eurozone sovereign debt issue, has forced institutional investors to identify better strategies for managing volatility, especially on the downside. While risk management remains a top priority, the low return environment is driving more investors to also look for ways to enhance returns by deploying timelier, more dynamic asset allocation strategies that can exploit market dislocations."
To manage volatility, 61% of Asian ex-Japan investors said they would diversity into alternatives, while 55% said they would add currency hedging strategies. Japanese investors, on the other hand, plan to increase fixed income assets (61%) with another 42% saying they would adopt a liability hedging strategy.
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