Asset Manager Says China to Become a Distinct Asset Class

(May 13, 2011) — China could emerge as a ‘separate asset class,’ according to asset manager RCM, a unit of Allianz Global Investors.

“We see interest from large US and Canadian pension funds, Asian sovereign wealth funds, endowments and large foundations,” Mark Konyn, chief executive at RCM Asia Pacific, said during a recent Allianz Global Investors conference in Berlin, as reported by IPE.com.

The emergence of the country as a distinct asset class is fueled by growing institutional investor interest for specialist mandates, according to the asset manager RCM.

The burgeoning interest in China among institutional investors is evidenced by the $236 billion California Public Employees’ Retirement System’s (CalPERS) recent commitment of $400 million to three emerging managers in the pension fund’s Manager Development Program II (MDP II) for public equity investment.

Recent data released by consultancy Mercer draws attention to the growing appetite for emerging market and alternative asset classes. Globally, manager search activity increased in 2010 as institutional investors looked to diversify their portfolios by pursuing opportunities in emerging market and alternative asset classes, Mercer showed.

“Interest in non-traditional asset classes continues to grow as investors look to increase diversification and take advantage of perceived attractive beta and alpha generation opportunities,” commented Andy Barber, Global Director of Manager Research at Mercer. “The trend away from traditional investment began some time ago and while events such as the global financial crisis led to a slowing of the trend, it is one we expect to continue. That said, traditional equity and bond mandates are likely to remain the dominant areas of search activity for the foreseeable future.”

In the UK, the strongest trend in 2010, according to Mercer, was the rising interest in emerging market equity and debt with total searches rising from one equity search in 2009 to 36. The move away from domestic equities continued with only four searches in 2010 compared to eight in 2009 and 17 in 2008. Searches for global and UK fixed income also dropped considerably, from 45 to eight and 33 to 10 respectively.

“Looking forward we expect to see limited interest in domestic equities or in the traditional markets’ regional blocs,” Barber said. “Exposure to alternative investments in aggregate is rising and we expect to see increasing activity in this area.”