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IPE Switzerland: China in your hand – understanding and mastering new asset classes

Ask yourself, when was the last time you introduced a new asset class into your portfolio? Did you feel comfortable when the first investments were done, completely understanding what you were getting yourself and your pension fund into in terms of potential but also risks?

Historically, asset classes like Emerging Market Debt entered the majority of institutional portfolios in Switzerland only over the course of the last 10+ years and then only as a small part of the portfolio. Low primary issuance, poor market liquidity and regular crises with the accompanying defaults lead most investors to shy away from this asset class.

But things have changed. Issuance has increased, liquidity has improved alongside economic fundamentals and the last significant crisis, the Argentine economic crisis, was in 2001/2. Coupled with the need for returns, EM debt has gained momentum in terms of asset inflows and achieved a more prominent role in institutional portfolios.

Investments in Chinese domestic equities (A-Shares) or bonds for that matter still have a hard time making it to the top of the list for pension funds to adopt and thereby prevent them from expanding their opportunity set.

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