• 45% of Asia-Pacific investors have reallocated asset classes due to regulations
• 52% are increasing portfolio turnover despite increased riskiness
• 40% of Asia-Pacific investors are shortening their holding periods, with market volatility seen as the biggest impediment to turning that trend

A new report released today by The Economist Intelligence Unit (EIU) finds that many institutional investors in the Asia-Pacific region are increasing turnover and shifting asset classes in response to today’s low-yield and regulated environment.

Changes on the institutional investment horizon: Asia-Pacific investors seek balance between risk and responsibility sponsored by Franklin Templeton Investments, is based on a survey of Asia-Pacific institutional investors and part of the global programme  Changes on the institutional investment horizon . It shows that today’s low-yield and regulated environment is driving more than half (52%) of Asia-Pacific institutional investors to increase portfolio turnover despite increased riskiness.

However, Asia-Pacific’s increased willingness to hunt for short-term returns stands in seeming contradiction to institutional investors’ approach towards their return targets. Only 26% say immediate pressures have prompted them to adopt a short-term approach to setting return targets, while 39% say these pressures have actually made them more focused on long-term objectives. Many of the respondents are insurance companies and pension funds, investors with lengthening liabilities that highlight the difficulty of achieving future targets.

Equities are the primary beneficiaries of shifting portfolio strategies in the region, but institutional investors are also looking to move into other asset classes as follows: 50% of respondents say they’re looking to increase their exposure to equities, 41% say to bonds and fixed income, 39% to commodities, 34% to alternatives.

Going forward, Asia-Pacific investors see market volatility as the number one barrier to lengthening their investment horizon; other top five reasons include reputational risk, short-term requirements, the global economic outlook and regulatory change.

Asia-Pacific investors also see alpha, or returns over benchmark, over the next 3 - 5 years coming primarily from new products (48%). Other top five areas of potential returns include new markets (38%), increased focus on factors (36%), regulation arbitrage opportunities (34%), and new technology and tools (23%).

Rashmi Dalai, editor of the report, says: “Asia-Pacific investors are faced with duelling challenges. On one side, today’s low-yield and highly regulated environment is causing investors to think more short-term and reallocate amongst asset classes despite increasing their portfolio risk. However, many investors are also increasing their focus on their long-term objectives, reflecting a high proportion of funds with commitments to insurance policy holders and pension recipients. The result is a community of Asia-Pacific investors trying to balance the hunt for returns with longer-term responsibilities.”

Press enquiries:

Ross Jenkinson, global head of marketing, thought leadership
+44 (0) 207 576 8047
[email protected]

Rashmi Dalai, managing editor, Asia-Pacific, thought leadership
+65 6428-2671
[email protected]

Notes to editors

The report is based on a survey conducted in June-July 2017. The EIU surveyed 571 institutional investors around the world. The research, which is a part of the Changes on the institutional investment horizon programme, explored how investors are adapting to changing fundamentals and risks, the effect on investment time horizons and asset allocations and the impact on long-term objectives. In Asia-Pacific, the survey included 200 respondents. Of these institutional investors, 56 are from commercial banks, 52 from insurance companies, 41 from pension funds, 30 from endowment funds, and 21 from corporate treasury funds. The Asia Pacific report and other content is available for download at institutionalinvestmenthorizon.eiu.com, which also features a global executive summary and reports focused on the Europe, Middle-East, Africa region and the North America region.  

About The Economist Intelligence Unit

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