Greenwich Report Shows Dramatic Shift Out of Domestic Bonds

In the six years since the global crisis roiled investment markets, Asian institutional investors have transformed their portfolios.

Since then, institutions have undertaken an aggressive campaign of diversification, shifting assets out of domestic bonds and into a broad range of asset classes.

“Today, Asian portfolios increasingly resemble those found among institutions in the United States and Europe—albeit with some significant differences that can be attributed to the rapid growth of economies and institutional assets across the Asian region,” says Abhi Shroff, Greenwich Associates Consultant and co-author of a new report from the Firm entitled, Institutions Transform Asian Portfolios.

Dramatic Diversification Poised to Continue
In 2015, Asian institutions hold an estimated $12 trillion in investment assets—up from just $7 trillion in 2011, as the list of addressable institutions has grown. Amid this remarkable growth in portfolio assets, allocations to domestic bonds dropped from 40% of institutional assets in 2009 to 28% in 2015.

During the same period, allocations to domestic equities have remained in the 10% range, while international equities holdings have more than doubled to 16%. “The decline in domestic assets in Asian portfolios has been as rapid and striking as the growth of institutional assets across the region,” says Jivan Sidhu, Greenwich Associates Associate Consultant and co-author of the report.

Thirty-three percent of the Asian institutions participating in the annual Greenwich Associates Asian Institutional Investors Study report they expect to significantly increase allocations to domestic equities in the next three years.

This sustained emphasis on domestic equities is likely attributable to the fact that many Asian institutions still maintain limits on offshore investments. Nevertheless, sizable shares of Asian institutions expect to make significant increases to international fixed income and equities over the next three years.

Large numbers of institutions are also planning to substantially grow allocations to alternatives including real estate, private equity, infrastructure, and commodities. Greenwich Associates also expects assets will continue to flow into Asian equities and emerging market equities.