In their search for greater portfolio diversification and superior risk-adjusted returns, Asian institutional investors are committing increasing amounts of capital to alternative investments. These institutions’ growing appetite for alternatives, together with their expanding assets under management, have created a large and growing market for qualified offshore alternative fund managers.
The rapid increase in Asian institutional demand for alternative investment managers has been driven by numerous forces. The number of Asian-based institutions actively investing in alternatives has significantly increased over the past decade, and the types of institutions active in the field now include sovereign wealth funds, pension funds, banks, insurance companies, financial cooperatives and other institutional categories. In addition, the proportion of assets these institutions invest in alternative investment managers has greatly expanded over this same period, even as the absolute size of their assets under management has grown. Moreover, institutions actively investing in alternatives are now based in more Asian locations, including numerous countries in Southeast as well as Northeast Asia. Finally, the last decade has witnessed significant growth in the range of alternative investment strategies to which Asian institutions commit capital.
Trends such as these represent a generational opportunity for Western fund managers to raise additional investment capital and achieve greater geographical diversification of their investor base.