August 24, 2021 | Stamford, CT — Continuing effects of the COVID-19 crisis are contributing to increased levels of manager turnover that could have lasting impacts on the institutional asset management industry in Asia.
In these volatile conditions, institutional investors are turning to managers with a commitment to providing the highest levels of client service and support. At the top of that list is PIMCO, the 2021 Greenwich Quality Leader in Overall Asian Institutional Investment Management.
Assets under management by Asian institutions grew by 8% last year, to $16.2 trillion. That growth was fueled by a healthy combination of dovish central bank policy, a robust economic recovery and strong equity performance. The pool of assets allocated to external managers grew at 11%, keeping the share of outsourced assets at about 22%.
Across Asia, the number of institutions managing material asset sizes continues to grow as well, diminishing market concentration and broadening the potential client base for asset managers competing in the region. As recently as 2016, the top 15 institutions in Asia controlled 84% of the region’s AUM. By 2021, that share had shrunk to 62%.
Also creating opportunities for managers is the continued diversification of Asian institutional portfolios. Almost 40% of Asian institutions plan to make significant cuts to domestic fixed-income allocations over the next three years, compared with only 13% expecting increases. “As they diversify, institutions also remain committed to increasing the share of assets outsourced to external managers with expertise and capabilities in international asset classes,” explains Coalition Greenwich Relationship Director Parijat Banerjee.
Increase in Manager Switching
In 2021, 36% of Asian institutions reported terminating a manager in the prior 12 months. At the same time, 85% of institutions say they switched managers over that period, representing a five-year high. Those termination and switching rates highest in the last 5 years and in many cases demonstrate COVID driven changed behavior by clients.
“This churn is creating vast new opportunities for asset managers looking to pick up new clients and assets—especially those who proved themselves reliable during the crisis,” says Parijat Banerjee.
When COVID-19 caused at least a brief flight to quality and disrupted normal due diligence processes last year, Asian institutions naturally turned to some of the biggest and most well-known fixed-income managers. At the top of that list is PIMCO, the 2021 Greenwich Quality Leader in Overall Asian Institutional Investment Management.
PIMCO’s strong brand, size and global footprint made it a natural choice for institutions in need of a manager at a time when in-person due-diligence visits were impossible. In addition, the firm’s excellent client service put it in a position to capitalize on client opportunities.
ESG Playing Bigger Role in Manager Selections
Another consequence of the COVID-19 crisis might be the increased influence of ESG issues on the Asian institutional asset management industry.
Despite pandemic obstacles, the share of institutions reporting that they consider ESG factors in manager hiring increased to 51% in 2021 from 42% in 2020. With so many Asian institutions employing ESG standards in manager selection, the sheer volume of manager turnover caused by the pandemic is embedding ESG more deeply in the industry and ensuring that managers hoping to expand their presence in Asia must commit to a robust ESG offering.
Click here for the full Report and list of 2021 Greenwich Quality Leaders in Asian Institutional Investment Management