New research has revealed institutional investors in the Asia-Pacific region are more confident than their US and European peers about reaching their investment objectives in the face of coronavirus volatility.
The research, conducted by CoreData for State Street in April, surveyed 250 investment professionals across pension funds, endowments and foundations, insurance companies, sovereign wealth funds and other institutions. Of the professionals it spoke to, 16 per cent were from the APAC region.
Accounting for COVID-19, 38 per cent of APAC institutional investors believe they will meet their short-term objectives, in contrast to 24 per cent globally.
Looking at long-term objectives, 85 per cent of APAC investors said they would meet their targets, versus 56 per cent globally.
The majority of institutional investors globally said they do not expect a rapid “V-shaped” recovery from the crisis, with two-thirds (66 per cent) not expecting economic activity to return to normal before 2021 or later. Asia-Pacific investors had similar expectations.
Ian Martin, global head of asset owner segment at State Street commented market volatility had clearly impacted the investment performance of investors globally.
“However, it appears that Asian investors are more confident about meeting their investment objectives largely because some countries in the region have contained the impact of the virus and the pandemic is at a later stage compared with other parts of the world,” Mr Martin said.
Despite market volatility, half of institutional investors globally were reported to be looking to increase allocation to equities in the next three to six months as they hunt for value.
In the Asia Pacific, institutional investors are most likely to add exposure to private credit (40 per cent), followed by equities (33 per cent) and active investments (25 per cent).
Globally, 76 per cent of respondents have retained confidence in their asset managers’ ability to navigate the crisis, but APAC investors had the most confidence in their managers, with 88 per cent expressing saying they were confident. The majority (88 per cent) rated their managers’ communication, support and information as either “good” or “very good”.
A mere 15 per cent of APAC investors said their asset managers have underestimated the impact and severity of the crisis.
“The findings suggest that asset managers in Asia Pacific appear to have kept institutional investors onside during the pandemic, reinforcing the finding that they have been less impacted than their global counterparts,” Mr Martin said.
Across the world, market commentary and strategic views have been seen as the most important ways managers can help institutional investors (76 per cent), a view which is similarly shared by Asian institutional investors (75 per cent).
However, compared with their global peers (44 per cent), 58 per cent of investors in the APAC have found managers’ use of technology to communicate updates, such as through podcasts, webinars, videoconference calls and online presentations, to be an important form of support. State Street said investors in the region have a greater willingness to embrace technological solutions.
But 45 per cent of APAC investors said they felt they could get better support from managers in technological updates (45 per cent) and investment opportunities assessments (55 per cent), in comparison to the global 33 per cent and 36 per cent respectively.
The pandemic has also created challenges for back-office functions, with 37 per cent of investors reporting they found securities valuations “challenging” or “extremely challenging” during the crisis.
This was followed by liquidity (34 per cent), timely reporting (34 per cent) and cash forecasting (30 per cent).
In the Asia Pacific, investors found timely reporting (53 per cent), liquidity (48 per cent) and cash forecasting (23 per cent) to be the largest challenges during the COVID-19 crisis.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].