Institutional investors in Asia Pacific are looking towards private assets to manage risk and diversify their portfolios.
With the impact of the Covid-19 pandemic and global economic slowdown, institutional investors in the region said that they will increase their private assets allocation to 11 percent, potentially by shifting some of their cash holdings into the asset class, over the next 12 months, according to Schroders.
The U.K.-headquartered asset manager's «Institutional Investor Study 2020,» conducted in April, looked at the responses of 650 institutional investors globally, including 173 from Asia Pacific, which have a combined $25.9 trillion in assets.
Some 69 percent of APAC respondents said Covid-19 had prompted them to look for undervalued assets while 20 percent said they would continue to diversify into alternatives and private markets in a bid to reduce their exposure to listed assets. The three main asset classes they wanted to increase their allocations over the next three years were private equity (47 percent), private debt (27 percent), and infrastructure equity (24 percent).
Uncertain Outlook
«Investors continue to be attracted to private markets to increase diversification and access specialized, alternative return streams. These characteristics become especially valuable at times when the global outlook remains so unclear,» David Seex, Schroders’ head of alternatives, Asia Pacific, said in a statement.
While 87 percent of APAC institutional investors said that Covid-19 would cause a major global recession and many agreed that Covid-19 has presented an opportunity to look for bargains, 60 percent said they would not make portfolio changes until the outlook was clearer.
«By choosing to sit on the sidelines, many institutional investors could miss out on attractive opportunities in private assets that arose from dislocations triggered by Covid-19,» Lily Choh, Schroders’ head of institutional, Asia Pacific, said.
