The pandemic has impacted the way Asian institutions manage their portfolios. Institutional investors have been reducing their fixed-income exposure while increasing allocations to overseas assets, equities, and alternative investments in search of returns. More specifically, they are increasingly evaluating allocations to growth sectors that are expected to gain from long-term structural changes, such as digitalization and sustainable investing.

According to our research, there are several approaches institutions believe will optimize portfolio returns, the first being effective risk management (69%), followed by the inclusion of factor-based investing into portfolios (47%), having the right investment scale (45.2%), and integration of database and technology (43.8%). Asian institutions are prioritizing the quality of companies, low volatility, and blending growth and value investments to build portfolios that are resilient and have greater flexibility to respond to unanticipated events. With aims to guard their portfolios against external shocks, integration of sustainability considerations is gaining traction among institutions, and of growing importance during the manager selection process for knowledge transfer.

Managers seeking to gain institutional mandates will need to prove their capabilities, agility, and dynamic portfolio management. Our report, Institutional Asset Management in Asia: Reassessing the Fundamentals, offers asset managers a look into the challenges ahead in the institutional space, and opportunities available to managers seeking to gain mandate wins.