“But you need to identify the accessibility versus the size of the opportunity, and the price of taking the opportunity.” An Asia strategy per se won’t be effective: managers should decide which markets are attractive to them and then develop the skills and resources to succeed. “Each market has different drivers, different tastes in product,” Fasso says. “Asia is a collection of very different countries at different stages of development.” AMP CI zeroed in on Japan’s deep and sophisticated institutional market some years ago. Its ageing demographic has an appetite for the yield generated by Australian fixed-income, says Mark Beardow, who heads the asset class for the manager. His team now manages close to $4 billion in a sub-advisory agreement with the Mizuho Asset Management, but also runs money for Nomura and Daiwa Group. “Our work on Asia to date shows that Japan has far and away the largest savings market of any country in Asia,” Beardow says. Mizuho draws on the manufacturer to cater for investors in the decumulation phase.
“They’ve got capital, and are looking for income to live on,” and even when currency transactions are taken into account, Australian government debt meets their needs, he says. AMP CI has set up an office on the ground, staffed by Japanese speakers, to look after this arrangement. In Japan, where client service is on par with investment process and performance in importance, a local presence is essential. “You can have the bestperforming fund, but if your client service and mid- and back-office reporting is poor, you won’t be successful,” Fasso says. But this isn’t the norm across Asia. The Indian, Thai, Indonesian, Filipino and Bruneian markets should be treated as fly-in, fly-out targets for now. “You can pretty much forget about it from an institutional perspective,” Fasso says. “They are hard to get money out of and aren’t very sophisticated. There are richer pickings further north.”
They are Japan, China, Korea and Taiwan. “Korea is probably Asia’s most tantalising and frustrating market. It ticks all the boxes: large population, high savings rate, strong economy. But it has a massive overweight to domestic assets and a reluctance to go offshore.” But the market is beginning to open. Its savings behemoth, the $US300 billion National Pension Fund, has expanded its targeted allocation to alternative assets from 1 to up to 10 per cent. Already, it has picked off trophy assets offshore, such as Aurora Place in Sydney’s centre. “It is particularly one to watch in the real assets space,” Fasso says. In Beijing, the $US2.7 trillion SAFE has begun to diversify away from cash and fixed-income towards equities and alternatives. Asian institutions typically invest a “minuscule” amount of capital directly in Australian equities, and usually gain this exposure through Asia-Pacific equities allocations, Fasso says.