Michiko Whetten, Head of APAC Applied Analytics, Analytics Product
Ayumu Matsuura, Director of APAC Applied Analytics, Analytics Product
Khai Sheng Ng, Director of APAC Applied Analytics, Analytics Product
In a structurally more volatile global environment, APAC asset owners, particularly pension funds and sovereign wealth funds (SWF), are increasingly applying elements of the Total Portfolio Approach (TPA). They’re shifting from static, asset-class-based risk management toward a more holistic whole-portfolio view – assessing risk, liquidity, and resilience across public and private assets.
How are risk workflows changing as APAC asset owners navigate sustained market volatility across public and private assets?
There is a global trend among asset owners toward adopting the Total Portfolio Approach (TPA), with decisions made increasingly at the whole-portfolio level. In APAC, this is not viewed as a complete replacement of traditional strategic asset allocation (SAA) frameworks. Rather, these investors are recognizing that asset-class silos are becoming less effective in understanding portfolio behavior during periods of market stress.
APAC investors are contending with substantial market stress, including persistent volatility, geopolitical uncertainty and FX swings. This, alongside rising allocations to private assets, and increasingly global, multi-asset portfolios, is driving a shift toward whole-portfolio thinking to strengthen risk management and resilience, particularly among asset owners, such as pension funds and SWFs.
In practice, this means evaluating decisions at the total portfolio level, looking beyond individual asset classes to understand how exposures interact across public and private assets, liquidity, derivatives, and currencies.
Private assets are a key driver of this trend. As allocations to private equity, infrastructure, real estate, and private credit increase, traditional portfolio rebalancing becomes more challenging. Private assets are inherently less liquid, and exposures cannot be adjusted quickly during market dislocations, placing greater emphasis on integrated risk analysis and dynamic portfolio implementation.
As a result, APAC asset owners are selectively adopting practical elements commonly associated with total portfolio thinking — including factor-based analysis, centralized overlays, integrated liquidity management, and whole-of-portfolio stress testing — to navigate a more complex and volatile market environment.
What considerations have become most critical in a volatility scenario for APAC asset owners?
1. Managing FX risk.
Global portfolios introduce significant currency exposures, and FX movements can dominate portfolio risk, obscuring the underlying risks investors intend to take. As a result, many institutions are managing currency risk more centrally through overlay programs, allowing exposures to be adjusted efficiently at the total portfolio level.
2. Rebalancing portfolios with public and private assets.
Derivatives overlays are increasingly used as flexible portfolio management tools. Rather than relying solely on traditional rebalancing, investors are using futures and other derivatives to adjust portfolio-level exposures - such as equity beta, duration, and currency risk – particularly in portfolios with significant illiquid assets where traditional rebalancing can be operationally difficult.
3. Monitoring liquidity.
In periods of market stress, capital calls, margin requirements, widening bid-ask spreads, and declining public market liquidity can occur simultaneously, creating liquidity pressures across both public and private assets. For portfolios with significant private market allocations, commitment risk becomes particularly important, as capital calls may rise unpredictably during downturns while derivatives exposures can generate contingent liquidity demands through margin calls.
In addition, the illiquidity of private assets can mechanically increase their relative portfolio weights during market drawdowns, potentially leading to unintended deviations from target risk exposures. As a result, there is growing recognition among APAC asset owners of the need for more integrated liquidity management, including enterprise-wide cash flow forecasting, liquidity stress testing, and maintaining appropriate liquidity buffers at the total portfolio level.
4. Building stress scenarios.
Stress testing frameworks are also evolving. In periods of heightened volatility, monitoring tail risk becomes increasingly important as correlations between asset classes can rise sharply, reducing diversification benefits. Portfolios that appear well-diversified under normal market conditions may behave very differently during market stress.
As a result, investors are increasingly moving beyond traditional risk measures and isolated asset-class shocks to evaluate how the total portfolio behaves under broader macroeconomic scenarios involving simultaneous moves in multiple markets. This is particularly important for portfolios with derivatives and options exposures, where risks can become highly non-linear as market conditions and implied volatility change rapidly.
Most APAC asset owners are not moving away from traditional SAA frameworks. However, many are selectively adopting practical elements commonly associated with total portfolio thinking – including factor-based analysis, centralized overlays, integrated liquidity management, and whole-portfolio stress testing – to navigate a more complex and volatile investment environment.
In increasingly uncertain markets, the ability to understand risk holistically across the total portfolio is becoming an important differentiator in building resilient portfolios in APAC and beyond.
Authors
Michiko Whetten
Head of APAC Applied Analytics, Analytics Product
Ayumu Matsuura
Director of APAC Applied Analytics, Analytics Product
Khai Sheng Ng
Director of APAC Applied Analytics, Analytics Product
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