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Asia’s fund selectors turn to alternatives

Are commodities and property going to boost returns? Fund selectors in Asia are planning more diversification into alternative asset classes, in particular commodities and property, according to FSA’s Asset Class Research. 


Fund Selector Asia’s Asset Class Research is a quarterly survey of long-term (12 months) sentiment of fund selectors in Hong Kong, Singapore, Thailand and Malaysia.

The two alternative asset classes, commodities and property, have shown a significant increase in the number of investors planning to add to their portfolio allocation.

At the end of June 2017, only 9% of respondents told FSA they were thinking of investing more in commodities, and 14% said the same about property. However, the numbers in September have grown to 38% and 33% respectively.

Long-term sentiment of fund selectors in June 2017

Data: FSA

The charts show the percentage of respondents to the Asset Class Research survey who told FSA they would increase, maintain or decrease their allocation to the asset class within the next 12 months.

Long-term sentiment of fund selectors in September 2017

Data: FSA

The data also shows that asset allocators have already been adding to their allocation because fewer respondents said they were not using these two asset classes in their portfolios in the September survey, compared to the June survey.

The responses of Hong Kong’s fund selectors showed a higher interest in property funds. All respondents said they had some exposure already in their portfolios. But 36% said they would add to their allocation and 9% said they would sell.

In Singapore it was different. 31% of Singapore’s fund selector respondents said they did not invest in property at all, only 25% said they would add to their allocation and 6% said they would sell.

The sentiment on commodities was more similar in the two financial centres, with 27% of Hong Kong investors and 35% of Singapore asset allocators planning to buy more and none planning to sell.

Fund flows data from Morningstar for funds domiciled in Hong Kong and Singapore show that real estate and commodity funds experienced net outflows in the third quarter of 2017. Those domiciled in US and Europe, however, have seen solid inflows.

The data suggests that Asia’s fund selectors may be allocating to US and European domiciled funds or that European and North American investors have been earlier to invest in property and commodities than their Asian counterparts.

Are property and commodity sectors abut to turn?

Source: FE. Three-year performance vs the S&P 500. In US dollars.


Part of Mark Allen.