The pandemic has resulted in a growth in demand for outsourced chief investment officer or delegated solutions, particularly in Asia, according to Mercer's Wealth Business Leader in Asia.
«In times of crisis and market volatility, we tend to see clients thinking more about delegation,» Mercer's Janet Li told finews.asia in a discussion about the growth the firm has seen for its outsourced chief investment officer (OCIO) solutions, particularly among Asian institutional investors.
With in-house teams stretched amid Covid-19 and shrinking budgets, the pressure for better risk-adjusted returns and the cost savings a delegated investment framework may generate have also been drivers of demand, she said.
Mercer's global assets under management reached a record $321.4 billion as of September 30, 2020.
On-Site Due Diligence Solutions
«Elsewhere, delegation might be seen as a best practice, while in Asia, it is often viewed as giving up power and decision-making. But with slow growth and thin margins, investors are being more careful about their decisions,» she added.
Li said that one of the key challenges the asset management sector is currently facing is limitations to travel, which has also resulted in increased demands for on-site due diligence solutions.
Management of Downside Risk
The recent market volatility has also prompted institutional investors to re-think their internal governance processes, as many realized their decision making structures could not handle rebalancing trades, de-risking and re-risking trades, and to consider opportunities such as high-yield and private debt.
«In general, what this crisis has proven is the importance of diversification. Nothing is more important to a portfolio than diversification, in terms of consistency in return patterns, risk management and management of downside risk,» Li said.
ESG Focus
«Going forward, I think the focus of the market will be ESG and green finance. Things are at an early stage but the key is how new regulations by governments in the region promote or discourage such investments, and I'm already seeing some divergence,» Li said.
