By Eugene Yuen | APAC Solution Specialist
Some key Asia Pacific equities universes saw the majority of managers outperforming the universe benchmark in 2H 2020. China equities strategies in particular saw more than 70% managers outperform the universe common benchmark with an average excess return of around 8%. These results seem to be attracting interest and flows from global investors.
Performance for Major Asia Pacific, Australia and Japan Equities Universes 2H 2020
Source: eVestment Analytics
Record-level institutional flows into Asia Pacific and China Equities universes in Q4 2020
Institutional asset flows for the All Asia Pacific Equity universe picked up momentum over the course of 2020 and saw record inflows during the fourth quarter of last year. Net inflows jumped to $13.3Bn, surpassing the previous record high for a quarter of $10.9Bn, set in the first quarter of 2018.
Quarterly Institutional Net Flows into All Asia Pacific Equities Universe
Source: eVestment Asset Flows, 2016-2020. USD Billions.
Non-APAC investors were the largest net allocators into Asia Pacific equities
The investor domiciles fueling this growth were largely in Europe, followed by the US. European institutional investors were the largest net allocators in Q4 2020 to Asia Pacific and China equities with close to $11b in net inflows, a significant increase from Q3 2020. Investors from United States, Latin American and Australia also increased net allocations into these strategies.
Net Flows by Investor Domiciles: Q3 2020 vs Q4 2020
Source: eVestment Asset Flows. USD Billions.
Consultant and investor research of Asia Pacific equities reached 12-month high in Feb 2021
Allocator and asset owner research of the Asia Pacific equities universe began picking up in July, following the early months of the global pandemic, reaching a 12-month high in February 2021. The initial spike in research in April 2020 was the result of portfolio reviews and manager evaluations triggered by pandemic concerns.
Total Research Activities on the Asia Pacific Equities Universe (Last 12 months)
Source: eVestment Advantage
Consultant and investor research is often directionally predictive of institutional flows one to two quarters in the future. Given this historical trend, future flows into APAC equities universe may be on the horizon, given current research activity.
Further insight into the focus areas of this research: The top 10 most viewed strategies are all China-focused products, with eight focused on China A shares. Two of the top viewed strategies are managed by local APAC asset managers, the others are managed by global asset managers. Given the scope of interest in China equity strategies, local managers could be leveraging this momentum in foreign demand to strengthen their visibility in the global institutional market and pursue new assets.
Raising assets globally
The China A-share equities market is competitive, with more than 70% of managers outperforming the universe’s most common benchmark since 2015. Therefore, performance alone may not be sufficient for managers to differentiate their strategies. In addition to promoting their track records, managers will need to understand how they rank against peers in terms of understanding of performance consistency, fees and portfolio characteristics. They will also need to strengthen their product positioning through both traditional outreach and database marketing to reach the expanding global market of potential investors. Download our guide to Institutional Branding >>
An analysis of intelligence on the largest public pensions in the U.S. and U.K., sourced from eVestment Market Lens, also points to notable interest among asset owners in increasing their exposures to emerging markets, international and China equity.