Asia’s buy-side trajectory to 2030 – What you need to know

At the APAC Buy-Side Forum 2021, a powerhouse of experts from across the region – business leaders, thought leaders from Bloomberg and members of the APAC Buy-side Council – dissected trends and plotted the buy-side’s trajectory to 2030 across seven dynamic sessions.

The event took place virtually across three days, 26, 27 & 28 October 2021, and was attended by more than one thousand finance industry players from the APAC region and around the world.

The buy-side to 2030 was the main event for 26 October. Through dynamic panel discussions, fireside chats and talks it explored three key themes: Data and Technology; Sustainability and Green Finance; and Investment opportunities with geographic and demographic insights. We take a deeper look at those discussions here.

Data and technology

The importance of finding new, relevant and secure sources of data and having the technological tools and talent to work with it were widely recognized at the Forum.

Identifying which alternative or unstructured data sources to use, quantifying their value in the investment process, recruiting talent to work with data, effectively cleansing and normalizing data, and storage and cyber security solutions emerged as key challenges now, and looking forward.

“As we throw our net ever wider in terms of the information that we need as part of the investment process, we inevitably move away from traditional data sets,” said Mark Konyn, Group Chief Investment Officer, AIA (Hong Kong). “The requirement to include increasing amounts of unstructured data puts a heavy burden on how we process and analyze that data.”

Panelists acknowledged a range of strategies and responses to ‘the data question’ and acknowledged that there is no one-size-fits-all solution.

Many firms are exploring AI applications to partially analyze swathes of unstructured data; and focused on recruiting top data analysts. Cloud, on premises and hybrid data hosting were all recognized as valid models, and next gen technologies as of paramount importance. Quantamental investing was predicted to become increasingly mainstream, and greater attention to cybersecurity will be needed.

Sustainability and green finance

As the world turns its attention and efforts to achieving net-zero carbon emissions by 2050, ESG investing will continue to take center stage across the public and private sectors.

The past two years has seen a dramatic increase in pledges towards meeting net-zero targets on the part of governments. At the start of 2020 less than a quarter of global emissions were covered; in November 2021 that figure has risen to almost 80 per cent.

“Bloomberg believes that sustainable finance is good for economies, businesses, and societies,” said Peter T. Grauer, Chairman, Bloomberg LP in his welcome remarks. “The next generation of investors are demanding more from their portfolios, and they expect their investments to make a real difference.”

“It was not that long ago that ESG or sustainable investing was synonymous with a performance trade-off. But it’s now clear that in the last few years this has flipped: ESG investing can help drive higher returns and better performance,” said Kathy Matsui, General Partner, MPower Partners (Japan).

Matsui went on to emphasize the importance of ESG being more than a compliance exercise. For sustainable and scalable growth to be achieved it must be wholly integrated into a company’s core business strategies, from principles of good governance to gender diversity to climate impact awareness.

Regulators and practitioners discussed what makes a good policy framework and reflected on progress towards a global baseline disclosure standard for climate. Inconsistency in the quality of reporting frameworks, standards and disclosures, lack of detail and understanding about how sustainability impacts financial performance and business strategy, and greenwashing were identified as major challenges the region – and world – need to overcome.

Investment opportunities

The third and final theme of the day explored investment opportunities driven by changing demographics, the opening of China’s financial markets and the rise of emerging markets beyond China, including RCN and India – market trends Grauer forecasted would “have an outsized impact” on the future of the buy-side.

“Today there is broad consensus that the private sector can be an engine for economic growth and that private investment in general plays a substantial role in financing development today,” said Jin Liqun, President and Chair of the Board of Directors, Asian Infrastructure Investment Bank (China), in his keynote address, going on to acknowledge that their increased appetite for new investments in emerging markets is partly due to more favorable investment climates.

The Chinese market, where the government has recently relaxed its stance on foreign ownership and a more mature market is developing, along with the emergence of better local talent and greater focus on culture and values by organizations, was cited as a prime example.

“New and existing players are investing resources to build a ‘global local model’ – leveraging global expertise but building onshore capabilities that can work with that global expertise, said Kenny Lam, Chief Executive Officer, Two Sigma Asia Pacific in a fireside chat. Lam also earmarked Japan and Southeast Asia as APAC locations to watch.

Longevity finance – products and services that recognize and respond to the economic clout of populations that are living longer, and better – was identified as another area of emerging opportunity, albeit one that is moving at different paces in different geographic locations.

“Life expectancy has been rising around the world. But we need to be mindful of the equity gaps that still exist because it’s not the case that we’re all living into our eighties. In fact, there’s still a 30-year life expectancy gap between some African nations and countries like Singapore, Australia, and Japan,” said Mark McCrindle, Founder & Principle, McCrindle (Australia).

Thu Nguyen, Managing Director and Head of Investment, VinaCapital (Vietnam), pointed out that countries like Vietnam, where the population is relatively young, would be able to learn from countries where the average population is older and longevity finance will evolve more quickly.

In conclusion, data and technology, sustainability and green finance and investment opportunities are and will continue to be key areas of interest and opportunity for buy-side players in the APAC region, and around the world.

Quantifying, cleansing and normalizing relevant alternative or unstructured data, recruiting talent, and having appropriate storage and cyber security solutions in place will continue to key challenges in the data and technology space. Talent recruitment, cloud, on premises and hybrid data hosting data storage models, cybersecurity, quantamental investing, AI applications and next gen technologies are future focused solutions.

ESG investing will continue to take center stage across the public and private sectors as the world works towards net-zero carbon emissions by 2050. are major challenges. Buy-side players are operating in a rapidly evolving ESG landscape where solutions to today’s major challenges – inconsistent reporting frameworks, standards and disclosures uncertainty about how sustainability impacts financial performance and business strategy, and greenwashing – are being worked on globally.

Investment opportunities for the buy-side to watch include longevity finance, and emerging markets like China, Japan and Southeast Asia.