Institutional investors in Asia ex-Japan have significantly raised allocations to alternative products in the last five years, the firm said.
“Asia-Pacific investors are keenly focused on alternatives, recognising that these allocations may reduce portfolio volatility [and] achieve differentiated returns,” said the firm.
“Over the secular horizon, we expect this investor demand for alternatives to continue expanding. We plan to continue growing this important business.”
Allocations by Asia ex-Japan institutions to hedge funds and private equity have increased to 9.9% of their assets currently from 2.7% in 2010, the firm said, citing data from Greenwich Associates, Preqin, Capgemini and RBC Wealth Management.
In Australia, institutions have increased their allocations to alternatives to 10.2% from 7.2% in 2010, said the firm, referencing Australian Trade Commission data.
Also, high net-worth investors in Asia and in Japan allocate about 14% and 13.1% of their assets to alternatives, respectively.
Separate reports by Allianz Global, Principal Global Investors and Natixis also reflect a growing appetite for alternatives.
Institutional investors in Asia-Pacific are more concerned about tail risk events such as oil price shocks, asset bubbles or geopolitical tensions compared to their global counterparts and Asian investors are “prolific users” of alternative investments, according to Allianz Global.
High net worth investors in Asia have a bigger risk appetite and prefer a mix of traditional and alternative investing. Alternative asset classes such as private equity and real estate, followed closely by actively-managed equity and bond products make up their preferred investments, according to Principal Global.
A Natixis survey showed nearly 75% of Singaporean investors (compared to 69% globally) believe the traditional approach to building a portfolio is not an optimal strategy.
PIMCO also said absolute return, benchmark-agnostic and “smart beta” strategies are gaining popularity throughout Asia-Pacific, along with income-generating products.
