Translation of a survey article originally published in AL-IN magazine vol. 54, December 2019.
AL-IN, a magazine for institutional investors in Japan, conducted its first survey about the use of multi-asset strategies among its corporate pension subscribers in 2013. Since then, implementation of such strategies has varied with changes in asset classes, allocations, and investment approach.
The 4th and latest survey was conducted in November 2019 with 104 corporate pensions responding. What does a multi-asset strategy mean now and how does it address today’s more challenging investment landscape?
Part 1 (of 2) of the survey’s findings appears below.
How prevalent is multi-asset investment among Japanese corporate pensions?
How many corporate pensions have embraced multi-asset investing? As shown in Chart 1, fifty-two investors (50.0%) responded they "already have multi-asset allocations," twelve (11.5%) said "it is on the table," and forty (38.5%) said they have "no plans to adopt [the strategy]." These responses differed very little from those in the previous survey in 2017 (49.4%, 12.4%, 38.2%, respectively).
When did respondents adopt the strategy? Six investors (10.7%) said "before 2013," six (10.7%) said in FY2013, eight (14.3%) in FY2014, eight (14.3%) in FY2015, nine (16.1%) in FY2016, six (10.7%) in FY2017, ten (17.9%) in FY2018, and three (5.4%) in FY2019.* The data show Japanese institutional investors steadily adopting the multi-asset strategy, with no apparent annual bias.
* The Japanese fiscal year begins in April and ends in March. FY2013 is April 1, 2013 to March 31, 2014.
The FY2019 data covers only April to end of November 2019.
How many multi-asset products do corporate pensions typically invest in? Twenty-four investors (46.2%) responded with one product, fourteen (26.9%) with two, nine (17.3%) with three, and five (9.6%) with four products. The number of respondents holding a single product almost doubled from the 2017 survey.**
** The jump in the number of investors holding one product, from 13 (28.9%) in 2017 to 24 (46.2%) in 2019, is deceptive. It results from an increase in survey responses (by 15) and an increase in certain products being dropped from portfolios, as explained in Part 2.
How much weight are multi-assets given in corporate pension portfolios? Twenty-four investors (41.4%) said "less than 5%" and sixteen (27.6%) said "6 to 10%". More than two-thirds of investors using the strategy maintained about 10% of the portfolios in multi-assets. Most investors did not consider multi-assets as a single large asset class. A significant minority, however, allocated more than 40% of their portfolios to multi-assets.
Where in portfolios are multi-assets allocated (multiple answers allowed)? "Alternatives" was the most common response, cited by thirty-two investors (50.0%). "Bonds," "multi-assets," and "others" were each cited by eleven (17.2%) respondents, nearly unchanged from the previous survey. Only three (4.7%) Japanese pension funds answered "stocks", the most common designation among foreign investors, as their preferred allocation for multi-assets.
( continued in Part 2: https://investmentjapan.jp/research/736/ )