Swiss investors are endorsing a “wait-and-see” approach on illiquid asset classes, as uncertainty mounts on the real value of the assets, Oliver Kunkel, head of asset manager section and controlling at consultancy PPCmetrics, told IPE.
“There are various issues with pricing, and we are closely monitoring how [asset] managers deal with these, including managing redemption requests,” Kunkel added.
PPCmetrics is currently observing “great uncertainty” as to whether the stated valuation of some illiquid assets reflects their true value, Kunkel added.
Asset managers are also grappling, in the current interest rate environment, with asset classes that had another function in a low interest rate setting, bypassing negative interest rates, including private debt and mortgages, he said.
In private debt, Swiss asset managers invest mostly via bilaterally-negotiated loan agreements (95%), while investments in syndicated loans, CLOs, liquid corporate bonds or cash are relatively rare, according to PPCmetric’s 2023 Asset Manager Review.
The asset managers invest a total of approximately €538.6bn in private debt/direct lending, with average assets under management (AUM) in private debt/direct lending amounting to around €3.19bn, according to the research.
Asset managers are also dealing with geopolitical risks, including in emerging markets, Kunkel added, giving an overview of the current challenges for money managers.
Around 73.8% of asset managers analysed by PPCmetrics have access to the onshore renminbi market for Chinese bonds.
According to the research, asset managers invests €598bn in emerging market bonds. Around 28.5% of AUM are in local currency mandates and 45.2% in hard currency mandates.
Blend mandates, meaning a strategic mix of bonds in local and hard currency, account for 26.3% of total assets. The average amount of AUM in emerging market bonds stands at €5.9bn.
The country allocation contributes with the largest share of the overall alpha, followed by stock selection, currencies, duration and yield curve positioning, it added.
Asset managers hold a total of around €214.8bn in world small-caps equity. On average, AUM in the asset class amount to around €788.5m, according to the report.
“The driver for asset managers’ allocation is the investor demand. Our clients were well prepared for the current environment, so they are not forced to de-risk or take other adverse actions,” Kunkel said.
Therefore, PPCmetrics is not expecting major shifts in terms of investments in the different asset classes.