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Demographic trends, regulation shape challenging industry
Investors and asset managers who managed to execute their strategic priorities amid challenging economic conditions and market volatility came out as winners in The Asset Triple A Investor and Fund Management Awards 2017.
The Asset 28 Jun 2017
For most asset owners and asset managers 2016 started horribly with fears of a global recession, although investors increased their risk appetite as the year progressed due to improved global growth and a sharp rebound in oil prices.
 
Although the mid-year Brexit vote sent a shockwave through the financial markets it turned out to be short-lived. The surprise election of Donald Trump also shocked the market, but resulted in positive returns towards year-end, buoyed by US equities.
 
In Asia, two major trends shaped the asset management industry during the awards period:  demographic trends, indicating continuous fast-growing wealth in the region, and regulatory developments that point to major reforms that are opening up new markets for investors and asset managers.
 
Wealth in Asia-Pacific surpassed North America’s for the first time in 2016 with US$17.4 trillion in high-net-worth investors’ (HNWIs) asset – the largest HNWI wealth by region globally. By 2025, world wealth is poised to reach US$100 trillion primarily propelled by the Asia-Pacific region, according to Capgemini’s world wealth report.
 
This rapid pace of wealth creation resulted in twin trends that complemented each other. On one hand, there were the investors who had vast pools of cash that were desperately seeking a home amidst a persistently low-yield environment.  On the other hand, there were lots of opportunities for asset managers with sufficient skills in producing investment products that can generate decent returns.
 
In terms of regulatory developments, China led the region with the launch of the Mutual Recognition of Funds (MRF) between mainland China and Hong Kong and the Shenzhen-Hong Kong Stock Connect.
 
The MRF, launched in May 2015, paved the way for the flow of more attractive Hong Kong-registered funds to China in 2016 at a time when mainland investors were leery of local funds buffeted by extreme volatility in the domestic market.
 
To date, the MRF is the most successful among Asian fund passporting schemes, which include the Asean Collective Investment Scheme (Asean CIS) and the Asia Region Funds Passport (ARFP).
 
The Asean CIS, launched three years ago, has been bogged down by regulatory issues. It struggled to achieve a critical mass amid differences in regulation among participating countries namely Singapore, Malaysia and Thailand.
 
The ARFP also faced challenges. It had issues regarding the tax regulations of participating countries Australia, Japan, Korea, New Zealand and Thailand.
 
Although the Shenzhen-Hong Kong Stock Connect, launched in December 2016, may have come too late to influence the bottom line of asset managers during the year, the opening of this new channel was nevertheless seen as a positive development for the asset management industry as a whole.
 
Similar to the Shanghai-Hong Kong Stock Connect, the Shenzhen-Hong Kong connect expands trading link and is intended to further strengthen mutual access between the Mainland and Hong Kong stock markets. Similar to the arrangements for Shanghai-Hong Kong Stock Connect, regulators from Hong Kong and the Mainland have established mechanisms to protect the integrity of both markets under Shenzhen-Hong Kong Stock Connect.
 
However, activity has been slow as overseas investors appear wary of Shenzhen-listed shares which are mostly technology-oriented, largely unfamiliar outside of the Mainland, as well as relatively expensive in terms of valuation.
 
Although other markets in the region were also buffeted by volatility, as well as the persistence of low-yield and low interest rates, asset owners and asset managers who managed to skillfully navigate these challenging markets came out ahead of their peers.
 
It is in this context that The Asset announces the winners of the Investor and Fund Management Awards 2017.
 
 
 
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Investor of the year
 
 
Insurance company of the year
 
Asia Capital Reinsurance Group Pte
 
The Insurance Company Investor of the Year award went to Asia Capital Reinsurance Group Pte. Ltd. (ACR). This is the third year in row that ACR has won this award attesting to its continuing strength as an insurance investor.
 
Despite the macro uncertainties and market volatilities in 2016, ACR achieved a 5.2% return in 2016 and has consistently delivered top quartile investment returns in the industry while maintaining minimum risk to its capital.
 
Although historically low yields have made it increasingly difficult for investors to rely on traditional sources of yield, ACR’s robust investment process and breadth of resources to conduct careful risk and return analysis, has allowed it to seek investment opportunities globally to improve investment return. 
 
ACR also hedged its portfolio against periods of market stress by focusing on structural seniority investment product opportunities and downside risk protection.
 
As an Asia-focused reinsurance company ACR conducts it business across Asia Pacific. In order to match its liabilities in different countries, the company is investing in these Asian countries. ACR has always been one of the most diversified Asian local currency bonds investors in the region.
 
As one of the largest foreign investors in China’s Exchanges bond market, ACR is one of the few offshore institutional investors who participate actively in the development of the China onshore RMB bond market and build a sound investment model to fully capitalize on investment opportunities in China.
 
ACR recently completed its 100% acquisitions of Asia Capital Reinsurance Malaysia Sdn. Bhd. (ACR Malaysia) and ACR ReTakaful Holdings Limited. ACR previously held 30% and 20% of ACR Malaysia and ACR ReTakaful respectively.
 
The acquisitions will see ACR Malaysia and ACR ReTakaful, including operating entities, ACR ReTakaful Berhad in Kuala Lumpur and ACR ReTakaful MEA B.S.C. (c) in Bahrain, operate as wholly owned subsidiaries of ACR.
 
With the acquisition of the ReTakaful entities, ACR is now expanding Shariah compliant investments, especially Malaysian and global sukuk investments. ACR will continue to diversify its investment portfolio.
 
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Impact investor of the year
 
The Link Real Estate
Investment Trust – Hong Kong
 
Two investors were recognized as Impact Investor of the Year, Link Reit for Hong Kong and BDO for the Philippines.
 
Link Reit prepared its Sustainability Report 2015-2016 in accordance with the Comprehensive Option of the Sustainability Reporting Guidelines Version 4 (G4) and the Construction and Real Estate Sector Disclosures, published by Global Reporting Initiative (GRI). An independent third-party assurance was conducted to verify the completeness and accuracy of the report and to ensure compliance with the Comprehensive Option of GRI G4 Guidelines.
 
BDO’s ESG Equity Fund continues to be the only Philippine investment fund which incorporates environmental, social and governance factors in the selection of equity investments. This fund addresses the need of institutional clients like schools, non-profit organizations and religious entities for a socially-responsible investing.
 
•••••••••••••••
 
Property investor of the year
 
The Link Real Estate Investment Trust
 
The Property Investor of the Year award went to the Link Real Estate Investment Trust (Link Reit). This is also the third year in a row that Link Reit has won this award.
 
In 2016, Link Reit acquired property with higher growth potential and disposed of some non-core properties to enhance its investment return. It completed the acquisition of 700 Nathan Road in Mongkok for HK$5.9 billion and sold 14 properties worth HK$3.6 billion.
 
Link Reit also established a comprehensive waste management strategy after a successful yearlong pilot programme to install waste management facilities at 46 properties. The strategy introduced a set of policies and procedures to facilitate waste separation and minimise waste to landfills. Link Reit work closely with tenants, service providers, government and non-government organizations (NGOs)  to educate and find optimal solutions. Some 40 tonnes of waste have been either recycled or reprocessed since commencement of the programmes to the end of the financial year.
 
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