KUALA LUMPUR (Oct 27): Asian institutions are increasingly leveraging technology to improve the pace and efficacy of their investment decisions and manager selection, according to Singapore and London-based asset management and distribution analytics and guidance firm Cerulli Associates.  

In its latest report titled “Institutional Asset Management in Asia 2020: Setting the Stage for a New Era” released today, Cerulli said as more institutions harness data analytics and generate insights to improve returns, deal sourcing, and manager selection, managers could face tougher selection requirements, expectations, and greater monitoring, going forward.

The report suggests that managing risk-return expectations and fee pressures are the top challenges faced by institutional managers when dealing with asset owners in the region, and the low-yield environment has brought about greater fee scrutiny.

It said this underpins the fact that outsourcing relationships have become increasingly collaborative and require a holistic approach towards portfolio management.

Cerulli said managers have responded by developing bespoke digital platforms, and some are taking a step further by forming partnerships or making acquisitions to create multi-functional, one-stop solutions, covering the full spectrum of operations from front- to back-end.

Furthermore, it said the pandemic has raised concerns about how Asian institutions can generate sufficient yields while ensuring liquidity to meet their liabilities.

“Especially among insurers, investing within regulatory limitations and risk capital charges is another major challenge to overcome.

“Thus, digital tools that can assist in asset-liability management are viewed as among the most effective ways to win pensions’ and insurers’ mandates,” it said.

Cerulli analyst Jaslyn Ong said that for managers, digital solutions can bring about cost efficiencies and at the same time, allow for more consistent and objective portfolio construction and management, due to the lower reliance on portfolio managers and their tenures in the event of turnovers.

“Nonetheless, digital platforms are designed based on varying capital market models and assumptions, human capital and house views.

“As we navigate through this low-yield environment, this could act as a stress test and differentiator for managers and their underlying models,” she said.