Asian Firms Return to Asset Management Outsourcing
In the immediate aftermath of the global financial crisis, many Asian institutions reacted to what they perceived as poor performance on the part of their external asset managers by building out internal management capabilities and moving assets in-house.
The results of the 2011 Greenwich Associates Asian Investment Management Study reveal that, over the past 18 months, institutions across Asia have reversed course. They are outsourcing assets and increasing – in some cases dramatically – the number of external investment management firms they employ.
Asian institutional portfolios expanded rapidly last year, with total assets under management increasing 20% from 2010 to 2011, to a total US$7.4 trillion. Over that same period, the pool of assets allocated to external investment managers grew even faster, increasing approximately 40% among investors that were interviewed by Greenwich Associates in both 2010 and 2011. As a result of that growth, the share of Asian institutional assets outsourced to external firms increased to US$1.1 trillion, moving to 15% of total assets in 2011 from 11% in 2010.
“If we exclude central banks and commercial banks, which manage most assets internally, the share of Asian institutional assets allocated to external managers actually increases to more than 30%,” said Greenwich Associates consultant Abhi Shroff.
Despite the rapid expansion of the pool of assets available to external managers in Asia, it is important to view this growth in proportion: total outsourced institutional assets among pension funds, endowments and foundations researched by Greenwich Associates in the US stand at US$6.4 trillion.