Emerging Market and Asian Equity
Australian corporate pension plan | Summer 2017
Engagement at a glance
An Australian corporate pension plan sought to invest a further AUD 200 million in Global Emerging Market Equity and potentially Asia ex-Japan, through one or multiple mandates.
This pension fund had one incumbent global emerging markets equity manager, appointed in early 2016, which had quite a distinct value style bias. With growth being favoured in the market over previous years, the client wished to diversify the style exposures by making an allocation with complementary portfolio characteristics. The investor was open to considering a specific Asia ex-Japan allocation rather than looking solely at Global Emerging Markets managers.
- The pension fund was keen to understand the depth and quality of managers within the global emerging market equity universe; they felt they knew the major players, having run an initial search in 2015-16, but not the less familiar names. bfinance was appointed in large part due to the team’s specialist knowledge of this asset class, and the ability to reach a large number of managers.
- Although the investor was initially sceptical about awarding an Asian equity mandate, the second stage analysis highlighted how many managers were able to deliver strong risk-adjusted returns in that specific area and the strong differentiation versus the GEM product set.
- Having found three favoured strategies (one global emerging markets and two Asia ex Japan), further scrutiny helped the investor to understand the impact these would have on the existing equity portfolio. Style Research analysis highlighted the complementary approaches of the managers, reinforcing the analysis of the bfinance team.
Our specialist says
Whilst bfinance has always had conviction in the GEM and Asian equity manager universes (there has always been a strong list of high quality managers), this search really highlighted the depth of these sectors. In many respects the Asian equity manager universe the strongest that it has been in the two decades that we have been researching this sector. Historically the universe has been dominated by a relatively short list of large incumbents. However, a group of newer managers with (relatively) shorter track records have scored very well within our process. With Asia proving an interesting discussion point amongst investors looking to diversify their global emerging market equity exposure, we are confident that there are a wide range of strategies which could fulfil this objective.