Shift to alternatives set to intensify
Sovereign investors are reaping the rewards of the equity bull market, but the shift to alternatives is set to intensify, according to Invesco.
Sovereign wealth funds and central banks have overtaken bonds to become the lead asset class for sovereigns across active, passive and factor strategies, according to Invesco’s sixth Global Sovereign Asset Management Study.
The average allocation to equities has increased to 33 per cent from 29 per cent in 2017 and was driven by several factors, including the equity bull market.
At the same time, active management remained the dominant equity portfolio strategy for Asia investors, with 58 per cent of equity portfolios actively managed in Asia.
Also, most Asia Pacific investors increased allocations to factor strategies (54 per cent) while such factor strategies continued to remain a smaller portion of portfolios than Western peers (6 per cent in APAC versus 14 per cent among Western sovereigns).
The study also found that half of Asia sovereign investors indicated a changing role for equities in their asset allocation, with 47 per cent of APAC investors expecting to decrease equity holdings over the next few years (versus 37 per cent among all respondents globally), while only 13 per cent expect to increase exposure (versus 25 per cent among global respondents).
Additionally, APAC sovereigns showed interest in private markets, specifically illiquid alternatives, despite regional investors maintaining a lower exposure to private markets than Western peers (19 per cent versus 26 per cent in the West).
Globally, most sovereigns would continue to allocate to private markets, focusing on opportunities in new regions instead of the traditional home bias, the study said.
Terry Pan, chief executive officer for Greater China, Southeast Asia and Korea at Invesco, said: “By expanding their universe of investment opportunities, global investors are realising the vast potential of the Asia Pacific region, which is undergoing a transformation in infrastructure.”
“Sovereigns have a variety of vehicles to access this market, including direct investment in private markets as well as through debt and equity investment.”
AUTHOR
Oksana Patron
Recommended for you
Some 42 per cent of CEOs say they are actively reinventing their business to stay relevant in the next decade, with consumer services the most common choice for asset and wealth managers.
Former Ophir Asset Management chief executive, George Chirakis, has joined private equity manager Scarcity Partners, while the asset manager has appointed a replacement from Macquarie.
Australian Unity has appointed a fund manager for its Healthcare Property Trust, joining from Centuria Healthcare, as it restructures the product with a series of senior appointments.
Financial advisers nervous about the liquidity of private markets funds for their retail clients are the target of fund managers launching semi-liquid products which offer greater flexibility and redemptions.
