A market-weighted index isn’t necessarily the best indicator of where growth in Asia will come from in future. Bernard Wee, group head of markets and investment at the Monetary Authority of Singapore told the Fiduciary Investors Symposium in Singapore that to maximise returns, investors must take a much closer look at the region and understand the nuances of trade and investment.

Investors need to take a granular look at emerging markets, according to Bernard Wee, group head of markets and investment at the Monetary Authority of Singapore (pictured), who says mean variance optimisation based on real variables like growth will result in a very different outcome.

“This type of granular work is something asset owners have to be very rigorous about when they enter emerging markets,” Wee said, adding MAS has been investing in emerging markets for more than 20 years.

“In Singapore we sit in this crossroads of emerging markets and developed markets. Being in Asia we are more conformable with emerging markets, but it also helps that Asia is the largest allocation in most emerging markets per region,” he said.

“There is no one emerging market, I think that is that is something you have to know.”

As an example he said the level of rates in LatAm is much higher than Asia with the latter having a different composition of inflation and a much lower peak policy rate.

“Asia is tied more to China’s fortunes than other regions in emerging markets. You need to look at emerging markets more granularly,” he said.

“The consequence of that also means the other challenge for emerging market investors is you need to think about what the market-weighted index looks like and whether that fits with where the growth opportunities are going to be.”

He said unlike developed market indices where market development and liquidity is comparable across markets, emerging market indices by market cap are slightly lagged because those that enter the index earlier grow bigger faster, and benefit from liquidity for a much longer time.

“But they are also the slightly more maturing individual countries, and it’s the new entrants to emerging markets that are faster growing but have a smaller allocation,” Wee said.

“You have to think about whether the market weight reflects the opportunities,” he said. “There are issues, GDP weighted is probably not practicable. I don’t have an answer, it’s something we are struggling with as well.”

The nuances of trade and investment

Expanding on the granularity theme, Wee said it was important to understand the nuances of trade and investment.

“You have to look at where the investment is coming from and where it is going to – not all FDI is the same,” he said, as an example.

“If you are building a plant in Vietnam as part of a globally integrated supply chain, that sort of FDI uplifts productivity a lot more than horizontal FDI where you set up a plant just to sell to the local market because of the large demand. You have to look at what type of FDI.”

MAS manages about $300 billion and is the most conservative of the three entities managing sovereign wealth in Singapore, the others being GIC and Temasek. MAS holds mostly liquid assets with investment-grade bonds in advanced economies taking up the largest share.

Wee, who oversees the investment of Singapore’s official foreign reserves, implementation of Singapore’s exchange rate-centred monetary policy, stability of Singapore dollar money markets as well as issuance of Singapore government securities, said he had been reviewing the market outlook through both a short-term and long-term lens.

“From these different lenses we have a slightly opposite view,” he said.

“In the short term, the market is pricing in tail risks receding and upside risks increasing, whereas in the long term, we think that tailwinds are receding and headwinds are increasing.”

Tailwinds of prosperity receding

Wee said the view at MAS is that the tailwinds of prosperity are receding. He said global population growth, a huge tailwind historically, is slowing quickly, alongside more geopolitical conflicts and trade tensions.

“The question facing all investors is: what do we do with all the cash?” he said.

“And that depends on what sort of environment there will be going forward.”

Continuing with the theme of granularity, Wee said understanding the drivers of growth required a more nuanced look at the trends. For example, the volume of global trade had flatlined since 2012 but what was more important was the composition and granularity, with the nature of trade changing.

He said historically there had been problems along the path of global growth, including an oil crisis in the 1970s, high inflation, savings and loans crisis, dot com crash, and the GFC which all had drawdowns, but didn’t derail the long-term trend of prosperity.

The issue today is the problems are everywhere all at once.

“If we think the headwinds are changing do we need to tilt the portfolio to build more resilience?” he said.

Looking at economic fundamentals, rather than market cap, means investors should have up to 50 per cent of their portfolios in Asia, according to chief executive of Asia for APG, Thijs Aaten, speaking on a panel of investors at the Fiduciary Investors Symposium.

“I am a fundamentals guy, so fundamentally what is going on? I think the centre of gravity in the global economy is shifting towards Asia,” Aaten said.

“I think next year or the year after, more than half of global GDP will be coming out of the region; and 70 to 80 per cent of global growth is in Asia, whereas 70 per cent of market cap is based in the US. We invest for the long term; we think in quarters of centuries.

“The US has 4 per cent of the global population and 40 per cent of the global budgetary deficit, to fund that requires 60 per cent of global savings. I’m not so sure that is sustainable on our horizons.”

Aaten, who has been based in Hong Kong for six years, told delegates that the optimal allocation to fundamentally align a portfolio with the level of economic activity globally would require increasing the allocation to Asia.

“You should increase your allocation maybe to up to 50 per cent [to Asia], being slightly provocative on that idea,” he said.

“Ultimately pensions are paid on returns.

“In Asia we will see two billion people rising to middle-income level and that will need infrastructure, housing, logistics etc.”

Aaten pointed to investments in Indonesia, which has the world’s fourth-largest population, as a great example.

“We invested in toll roads in Indonesia that connects people in remote areas and brings economic prosperity,” he said. “One of the obstacles is not enough market cap in Asia but that’s why we like privates. If you only look at market cap in Asia, then in my view that [allocation] is far too low.”

Alpha in private markets

APG established an office in Asia in 2007 and has invested in infrastructure, private equity and some fixed income in the region since then.

“We have done close to 10 per cent over that time on an annual basis which is decent returns for the pensions we have to pay,” he said.

“Investing is about looking forward and I am quite optimistic about Asia and the opportunities that are out here in the region.

“For sure, the market is less efficient here so you should apply active management – and active management is not just about picking winners but making sure you are not buying the losers – and get out of risky assets in time because that usually helps a lot in achieving your return goals.”

Aaten and fellow panellists, Albourne Asia chair Richard Johnston and Lexington Partners partner Tim Huang, both based in Hong Kong, agreed Asia was an alpha play.

“One of the lessons in my time here is I feel like I’ve been in more bear markets than bull markets,” Johnston, who has been based in Asia for 34 years, said.

“Asia is a beta story of perpetual disappointment but has actually been an exciting alpha story. In some ways Asia deserves to be a beta story because there is still not enough discipline around the allocation of capital. You have to look at each market. In some, the government decides what margin I make there; or it’s a family, crony capitalism, not the market.”

Johnston said investors have to “dig down and look”.

“The headline indices are to be avoided, that’s what I think from my time in Asia,” he said.

“There are huge amounts of alpha at the moment. I have seen good stock pickers generate 10 per cent a year, so it doesn’t matter what beta is if alpha is so good. I am a great believer in the alpha.”

Huang, who returned to Asia in 2005 after spending his adolescent years in the US, said there is dislocation with public markets but there are certain pockets of the private markets that can generate good alpha.

“My predominant disposition is that you should be in privates because alpha can be achieved there,” he said.

Boots on the ground

All panellists agreed that having people on the ground in Asia was an important part of the story.

“We have 10 investment committee members and I’m one of the 10, so the Asian view isn’t very strong. Most sit in NYC,” Huang said.

“Being here allows for the ability to dive into the next level and have people on the ground who can peel the different levels of the onion. If we can buy risk we understand, then we can have a more intelligent conversation whether it is worth taking on that risk.”

Johnson pointed out that having people on the ground allows investors to understand the nuances of jurisdictions and structures.

“In private credit for example there are a lot of interesting solutions. There are phenomenal niches in this region, but you do need a lot of local knowledge,” he said.

He said investors are “suffering from peak American exceptionalism” and that is crowding out opportunities in other jurisdictions.

“I feel it in private credit and hedge funds,” he said.

“Investors saying I can get this in America, why would I come to anyone else in the world? But America is not without its risks going forward.”

APG has offices in both Hong Kong and Singapore and Aaten said there were many benefits in having investors on the ground.

“Half of what we are doing is private investing in infrastructure, real estate and real assets, and those are based on relationships and the network you need to build,” he said.

“We employ 90 people in Hong Kong, and 20 different nationalities. That shows [us] being tuned to the local structures of different countries. Emerging Asia is very heterogenous, not something where you can use the same model in each market.”

Aaten spoke of deals that had been negotiated in Cantonese with the documentation in English – deals that couldn’t have been negotiated and closed from APG’s Dutch headquarters.

“Being on the ground gives you a different view, seeing what is really there,” he said.

“One of the challenges in the job, is that the views and perceptions I hold are very different from what those in Amsterdam or New York might think because they are reading the papers which doesn’t always reflect what is the reality on the ground.

“That is a tough job because sometimes our views are different from the average trustee in the Netherlands who reads the newspaper and thinks that’s what is really going on.”

Aaten also argued for investing in Asia with regards to ESG considerations.

“If you want to have impact in the energy transition or climate change then think about where to have the most impact,” he said.

“Do you want to clean something that is already relatively clean like the Netherlands, or help a country leapfrog coal and go to renewables? Sixty per cent of global emissions are coming out of Asia. We are exercising our influence to help make changes.”

The strength of China’s national leadership has been and will remain a central topic for avid China watchers around the world. As the nation heads into a structural reshuffle of its economy, investors, researchers and political scientists have different views on Chinese policymakers’ ability to work with the financial market from this point on. 

At the Top1000funds.com Fiduciary Investors Symposium earlier this month, Logan Wright, China markets research partner at Rhodium Group, said Beijing’s lack of policymaking actions so far on several fiscal and economic issues is a worrying sign.  

“Some believe there’s an awareness of the problem,” he told the delegates in Singapore. “There’s a belief that the [Chinese] leadership can basically counter some of these structural challenges when push comes to shove.” 

“I’m a little more skeptical of that argument at this point, given what we’re seeing at this stage in Chinese economic policymaking.” 

A case in point is the local government debt, which is at an historical level right now in China, Wright said. Reuters reported that the debt has reached 92 trillion yuan ($12.58 trillion) in 2022 – 76 per cent of the country’s economic output in 2022, up from 62.2 per cent in 2019. 

China held its Central Financial Work Conference in November 2023 (which itself was delayed for over a year) and was supposed to discuss measures to put the debt on a more sustainable path. However, there were no concrete announcements apart from fleeting media reports on potential refinancing plans for local government financing vehicles. 

“You can’t do nothing, and you can’t keep doing exactly what you have been doing in the past to fund local government investment. This is the conundrum that Beijing is facing,” Wright said. 

“But the answer we’re getting is silence. 

“We should now be questioning the capacity of policymakers and whether they really are aware of the challenges that are being faced, and if they do, why these solutions keep getting punted down the road.” 

Confidence issue 

However, think tank scholar Cheng Li disagreed and argued that despite various critical opinions, the Chinese leadership is “in relatively good shape”. Li is the Professor of Political Science at University of Hong Kong (HKU) and the founding director of its interdisciplinary think tank, the Centre on Contemporary China and the World.  

That is because first and foremost – different from what the Western media tends to portray – there is no major conflict within Chinese leadership, Li said.  

“Of course, factions of parties existed in China, but it’s not out of control at the moment. Otherwise, the so-called Xi Jinping’s monopoly power is just a contradiction,” he said.  

“I emphasize that we cannot understand Chinese leadership’s mindset without putting China in the global perspective. 

“In that regard, some would say the problems mentioned about China is also global to a certain extent. We talk about China’s local debts – what about debts in the US? In Japan? Different nature of debt, but even higher [levels].” 

Addressing the World Economic Forum in Davos earlier this year, Chinese Premier Li Qiang portrayed the nation’s ability to deliver strong GDP growth without resorting to “massive stimulus” as a point of pride. Despite the mounting deflationary pressure, he said China “did not seek short-term growth while accumulating long-term risks”.  

But HKU’s Li said this is not an indication that the government is unwilling to act or that a stimulus package is completely off the table, but that the nation’s leadership needs time to first determine whether it’s the right thing to do.  

Looking into the next three to five years, Wright said the slowing economic growth prospect is very real in China. The lack of fiscal revenue is one key reason. 

“[China’s] 17 per cent of GDP in fiscal revenue is the low end of the OECD, which has an average of 34 per cent. The US has 27 per cent,” he said. “Those are real constraints in terms of how China will meet its ambitions.” 

“I think it’s very difficult to think about growth much above 3.5 per cent in the medium term.” 

Li agreed that the environment is not ideal in China but emphasized that apart from pure economic factors, investors are also concerned with security and stability.  

“China is among the very few countries that can claim it can maintain stability, even though that stability is because of Chinese authoritarianism,” he said.  

Li said his personal observation interestingly revealed that while there is a general pessimism among Chinese elites, the wider public tends to be more optimistic about the nation’s economic status. Around the world, the recent Chinese equity rout probably lowered confidence towards the nation further for some, but Li remained steadfast.  

“If confidence or policy are the real problem, don’t you think it’s relatively easy to fix compared to serious structural problems like environment or security? 

“That’s the reason I’m optimistic of China. I know that I’m a minority overseas and a minority in China, but I want to make sure that side of story is heard.” 

 

Investing in Asia poses an ESG dilemma that investment in other regions throws up less frequently, namely, that most manufacturing companies there derive the energy needed to run their operations from high carbon-emitting sources, principally coal.

This inconvenient truth was just one of the challenges posed for investors in the region, outlined during the Fiduciary Investors Symposium in Singapore last week.

Khazanah Nasional head of strategy and asset allocation Wai Seng Wong said the $27 billion Malaysian sovereign wealth fund has always had a home bias, “and home, in this case, is not just Malaysia, but a preference and a comfort with China and India and everything else around us”.

But this home bias presents challenges for the fund’s ESG and sustainable investment aspirations.

“When we speak of the…manufacturing sector, the biggest elephant in the room is a source of energy, actually, in this region. It’s mainly coal,” Wong said.

“And no matter what you do, the moment you allocate to southeast Asia, or Asia, your ESG scores will pretty much go sideways.

“That’s the reality of the region.”

“Our challenge in the portfolio is we are very heavy emitters. We have an energy utility company. We have airlines, we have airports, we have construction. And all of that is really the focus for us, in terms of decarbonisation, and transitioning away.

Wong said fund applies a two-prong strategy to managing the issues.

“One, you go ahead of the curve, take a look at reducing your portfolio emission through investing in green energy, investing in anything that reduces your emission,” he said.

“Or, the other approach is go with the flow, the world will decarbonize on its own, chill, relax, let’s just go with it, because the West is doing that so we just buy those stocks,” he said.

“It really depends on your ambition, but also depends on your targets, and also what’s inherent in our portfolio.”

Wong said the find doesn’t take an either-or approach to its portfolio, it does both.

“On infrastructure, and renewable energy and all of that, we take the more proactive approach to decarbonize the portfolio,” he said.

“But on the other side – where we perhaps have less control and perhaps the market’s more mature, and [where] I say we can relax a bit more – will be out PE funds, will be our developed markets portfolio where, just by virtue of the fact that we go for quality, we will decarbonise and we don’t really have to focus so much.

“So really, it’s about choosing our battles.”

Temasek director of macro strategy MK Tang said Temasek works closely with its portfolio companies to understand their aspirations and actions on sustainability; and internally, it factors in a carbon price of $50 a tonne when assessing potential investments.

“We expect that to go up to $US100 [a tonne] by 2030,” Tang said.

“And then one other thing, very important that we do is essentially try to think about sustainability in a holistic kind of way,” Tang said.

“What that means is that we do not just invest in green companies. There are a lot of non-green companies out there. We also evaluate companies in terms of the vision, in terms of their plans, in terms of the clarity of being a less significant emitter of carbon going forward. We evaluate those companies in those terms as well.”

Tang also said that while demographic trends are well established, the impact of those trends has shifted over time. Two decades ago, the Baby boomers were ageing from youngsters to 56 years old.

“But now, going forward, the aging that we’re talking about is slightly different, because those people are aging into retirement,” he said.

“In that case, they have to dip a little bit in the nest egg; they have to dis-save. What that means at the macro level is really that potentially we can see an inflection, pretty significant changes in the consumption and savings dynamics going forward.

“And that could potentially add to a lot of other structural factors that…actually could push up structural inflationary pressure going forward. What that means, and what that brings is higher structural real interest rates.”

Tang said that as an asset owner “high real interest rates are really great”.

“The challenge, obviously, is that for companies that are less proven, they have less cash flow. The valuations and also the financing opportunities could face a lot of headwinds when real interest rates are high.”

Tang said that for long-term investors “that’s really a key”.

“What we try to do, of course, [is] manage technical risks, but we also try to ride out short-term storms,” he said.

“It’s exactly in things like this where a lot of green companies that actually are not proven to be successful companies yet in terms of commercial returns, we stay very focused on the longer-term prospect, on the longer-term returns, as well as impact.”

Brunei Investment Agency acting chief investment officer Su Tengah said the home bias issue the agency faced was quite different – it has invested since inception without a home bias because there wasn’t a home market to be biased towards.

But expanding its portfolio to cover other markets and widening its asset allocation has presented some other challenges.

“Our reserves were mostly invested in developed countries,” Tengah said. Initially investing mostly in public markets, it has since expanded to encompass other asset classes.

“Ten years into the establishment of BIA, our predecessors then started amassing a big real estate portfolio all around the world,” Tengah said.

“The big push for alternatives in BIA really didn’t happen until recently, not until the post-QE era.”

Tengah said the agency is now expanding into other geographies and asset classes but its size – while its assets are not publicly disclosed, BIA has a relatively small investment team – means it must be selective about how it grows.

“Everyone has a different context,” Tengah said.

“Upon reflecting, I realized ours was more a structure issue. We had a very small team. People didn’t really specialise, so we could only at any one point in time focus our efforts on one thing.

“And so actually in building out Asia, or in building out VC, we were always cognisant that we had to be sequential, because we couldn’t be in all places all at once.”

“We just had to be sequential and start where we thought we could first be more effective and evolve the exposure towards our asset allocation.”

Tengah said BIA looked at “things that we didn’t have a lot of in the portfolio, and these were technology investments so we also started building out our venture program”.

“And then, as an extension to that, we also pivoted to growth and growth infrastructure,” she said.

“We would funnel pipelines for our growth investments through our venture managers, and then also growth as a thematic, growth and growth infrastructure. There’s just a huge need for it, especially in this region, whether that’s digital or for decarbonisation efforts, so more investments going into that.”

Tengah said BIA also started down the ESG path.

“We didn’t really have proper frameworks, but we just wanted to start,” she said.

“And I think bottom-up that theme is clearly coming out of each and every one of our portfolio managers’ ideas and investment books.”

Tengah said that even though investing in China can be challenging in, “the preface of investing in China for us has changed”.

“Now, opportunities have opened up and investors do need to embrace Asia, in its diversity and its entirety,” she said.

Tengah said there are opportunities emerging in Japan, even if it remains relatively expensive; and in southeast Asia and Korea “maybe opportunistically”.

Leading sustainable finance researcher has urged global investors to maintain a critical mindset when approaching an asset class’s green certification, saying that buying into sustainability claims blindly can undermine both the investment’s returns and the ultimate societal goal associated with it.  

Sumit Agarwal, Low Tuck Kwong Distinguished Professor and managing director of the Sustainable and Green Finance Institute at National University of Singapore (NUS), said while investors are keen to put money behind responsible assets, most know little about the implications of green certification. And real estate is one asset class at the epicenter of this problem.  

With a research interest in household sustainability, Agarwal led a study which examined the water consumption data for every apartment and commercial unit in Singapore between 2011 and 2020. His team also garnered the electricity consumption data for most residential buildings in Singapore.  

Around 55 per cent of Singapore’s buildings are certified under the nation’s Green Mark (GM) scheme – a rating system designed to evaluate a building’s environmental impact and performance – and the target is to increase that to 80 per cent by 2030.  

However, Agarwal’s team found that, worryingly, the household utility consumption level actually increases 3.3 per cent after the building’s green certification. He told Top1000funds.com’s Fiduciary Investors Symposium that the phenomenon could be caused by a wealth effect.  

“What is driving the result is because after the building goes through this Green Mark certification process… the unit apartment price goes up by on average 2 per cent.” he told the delegates in Singapore.  

And because renters don’t benefit from the property price increase, their energy consumption does not increase like homeowners in these buildings.  

This discrepancy between the GM’s intended usage and its actual implications can lead to unintentional greenwashing for investments, Agarwal said.  

“Unless we fix this kind of loophole, we are actually misleading the investors, and we’re misleading the regulators in the value of this Green Mark certification process,” he said. 

“When we uncover this kind of problems – unless we address them – these assets will be valued down.” 

He added that the broader Asian region has much more work to do on the standardization and awareness of sustainable investments compared to Europe and North America.  

For example, as of March 2023, there are over 5391 investors and service providers globally that have signed up as UN PRI Signatories – a pledge for organizations to publicly demonstrate their commitment to responsible investments.  

Among them, 1076 are US signatories and 858 are from the UK, while China only has 136 signatories, 123 in Japan, and 262 in the rest of Asia. This is not to mention the absence of countries such as India and Indonesia, Agarwal said.  

“One reason is most of these countries don’t even want to address this [problem]. If you ask where India is on net zero, India says we will only try to address that by 2070. If you ask China, they will say 2060, while countries like Japan and Korea are saying 2050,” he said.  

“There is huge variation in Asia on what countries put their priorities on. Because they are saying it’s not lives, but livelihood, that we care about right now. 

“Livelihood is more important right now for us to grow – to reach that point where we can think about sustainability as a key focus.” 

Regarding suggestions that wealthier countries may have to subsidize developing regions when it comes to solving climate change issues, Agarwal said organizations such as the World Bank’s International Finance Corporation are already working with the private sector to develop bonds used to finance relevant areas. But there are also risks in this solution. 

“Think about Indonesia – the country has relied quite a lot on coal. These coal contracts have been written for the next 30, 40 years and these assets will be stranded if we don’t finance them. 

“People have not been thinking about the legal actions the owners of these mines will take against the country and against the financial institutions if you strand these assets. 

“We have to be mindful of the legal aspect when we’re pushing [the subsidy] hard.” 

The specific drivers of growth for Asian economies means a traditional view of asset allocation is not necessarily the best way to approach investing in the region, the 2024 Top100funds.com Fiduciary Investors Symposium in Singapore has heard.

GIC senior vice president, total portfolio policy and allocation, Grace Qiu told the symposium that the backward-looking nature of benchmarks means that they may not necessarily be the best guides when assessing the potential of developing markets or regions.

Qiu said investors on the ground can often make better decisions.

“Benchmarks may be the best simple and transparent rule-based solution you can come up with in a single asset class. But in a total portfolio context, some of these important decisions can be made by ourselves.”

“As investors, we know the investment objective, the time horizon, and the risk tolerance. So, we should potentially take those decisions in-house, and make the right allocation accordingly.”

Qiu said that in emerging markets “the benchmark may potentially be even worse than…in developed markets”.

“Because [the benchmarks] are backward-looking, they’re not really reflective of the true [reason] why we allocate or invest in emerging markets,” she said.

“For us, making more granular decisions on not just the asset class, but also regional allocation, in a consistent manner across the total portfolio is an important task for asset allocation.”

Pictet Asset Management senior investment manager, multi asset Andy Wong agreed that asset allocations based on benchmarks are by definition backward-looking.

“Your variance, covariance matrices [are] mostly backward-looking,” Wong said. “Also, it is quite arbitrarily confined. People say the US economy is doing well, you should buy S&P 500. Actually, half of the revenue is from overseas.”

Wong said he has “a strong view that the semiconductor is the foundation of modern technology”, and being located close to supply chains for major manufacturers provides a useful perspective.

“Understanding some of the bottlenecks, understanding some of where the new technology is going to will help us think about where the world actually globally will be heading next,” Wong said.

Wong said investors shouldn’t use today’s use-case – which might be reflected in current benchmarks – to try to assess the investment potential of technology.

“When Apple was at $200 billion market cap, people were saying that even if every phone in the world is an Apple phone, they were overvalued. At $2.6 trillion today, quite clearly, it’s more than just a phone call machine; it is connectivity, it’s ecosystem, it’s productivity, it’s GPS, iPod, everything in one. All of these things we couldn’t imagine from before.”

Wong said asset allocation needs to be “a little bit more nuanced”.

“You need to look at fundamental drivers,” he said. “If you want to understand risk, you need to understand equities. If you want to understand equities, you need to understand US equities, which is 70 per cent of the market now.

“And then you need to understand Magnificent Seven, you need to understand AI, you need to understand semiconductor. So, from our perspective, themes and ideas are an integral part of asset allocation.”

Senior managing director, chief investment strategist and head of Singapore, AIMCo (Singapore) Kevin Bong said that from a portfolio construction perspective “diversification benefits; differing sector compositions; different stages in the economic and market development cycle; differing political, economic, and policy cycles; they all mean that the investment markets will not be perfectly in sync with what is I think, typically a developed market-heavy portfolio, and most of us have”.

“You could argue that some of it is an unfortunate side effect of slowing or a reversal of globalisation,” Bong said.“But I suppose if the markets give you lemons, you make a lemonade portfolio.”

Bong said that it is “admittedly more aspirational than a reality, but there is always alpha potential in new markets”.

“One could argue that active management opportunities are attractive across the Asia Pacific region, in part because the markets are not as efficient for the most part, but also because there’s meaningful dispersion in the region,” Bong said.

“All of that sums up to a picture where, especially for where we’re starting from Asia is an attractive opportunity.”

Qiu said asset allocation “needs to adapt to the new environment, to the new regime; and under the new environment asset allocation we believe at least, should be more flexible, more deliberate, and more granular.

“What is the next frontier? What is the newest area of innovation in asset allocation that we can think of to actually bring our portfolio to the next step?

“Those activities lie in some of the maybe more traditionally called bottom-up or more granular type of activities that doesn’t necessarily fall into traditional asset allocation mandate or asset allocation job description.”