81% shift to private markets as investors move to diversify

Investments are likely to steer towards carbon measurement at 69%.

Over 81% of Hong Kong asset owners are shifting to private markets to diversify their portfolios, according to a recent Morningstar Asset Owner Perspectives Survey.

This is the leading figure in the survey, higher than the global average of 56%.

Currently, 22% of local investors allocate to private markets, with 68.6% of respondents having increased their exposure over the last 12 months.

Morningstar also found that artificial intelligence governance, Environmental, Social and Governance (ESG) expectations and regulatory changes affect how institutions construct their portfolios.

About 33% of investors repositioned their portfolios after trade disputes, followed by 11% attributing the shift to the Middle East Conflict and 19% to the current US administration.

ESG has also become more important to investors, said Morningstar. This year, 42% of respondents said ESG has become more material in the past five years, the second-highest figure globally, after France (47%).

Morningstar said a stable 41% of investors say ESG considerations are needed for energy management.

Around 45% of respondents also said ESG considerations contribute to fulfilling fiduciary duty, the third-lowest globally after Canada (43%) and Japan (37%).

The survey showed the Hong Kong market is likely to focus on carbon measurement at 69%, followed by China (64%) and Singapore (59%) for Asia.

Morningstar said private markets continue to attract interest as investors seek to diversify and find more return opportunities.

“At the same time, geopolitical developments remain an important influence on portfolio positioning and ESG considerations continue to shape investment decision-making,” it said.