-
Mercer report uncovers asset allocation and investment trends on
nearly US$5 trillion1 in assets under management (AUM) from
government, corporate, and mandatory pension schemes across Latin
America, the Middle East, Africa, and Asia. -
Indonesia’s corporate pension system sees employers executing a
conservative slant to fixed income and cash/short-term assets. -
Other investors in Indonesia including institutions and retail
investors are similarly decreasing allocations in equity and
increasing fixed income and cash. -
Globally, exposure to equities has been increasing since 2017 – equity
allocations rose approximately 8%, from 32% to 40%, at the expense of
fixed income. -
Market liberalization is enabling more diversified portfolios through
increased exposure to foreign assets at the expense of domestic assets.
JAKARTA, Indonesia–(BUSINESS WIRE)–Mercer, a global consulting leader in advancing health, wealth and
careers, and a wholly owned subsidiary of Marsh & McLennan Companies
(NYSE: MMC) launches its inaugural issue of Growth
Markets Asset Allocation Trends: Evolving Landscape, a report
that provides insights on the asset allocation and investment trends
impacting pension fund assets of almost US$5 trillion in AUM across
Latin America, the Middle East, Africa, and Asia.
Mercer’s report noted significant variation in broad asset allocation
among countries, driven by regulatory factors as well as market
conditions, such as high levels of local interest rates supporting
investment in domestic fixed income and cash.
Of the AUM analyzed, 56 per cent of assets were from corporate and
government pension schemes in Asia. Assets from Japan were particularly
significant with the funded government pension system in Japan being the
largest in the world with US $1.5 trillion in assets.
Globally, average allocations were 46% to fixed income, 40% to equities,
4% to alternatives and 10% to cash/other. This positioning represents an
increase in equity and a decline in fixed income over the measurement
period, from 32% and 57%, respectively. Significant home biases remain,
but Mercer expects the trend of market liberalization to continue as
regulatory changes support broader global investment.
In addition to an increase in overall equity exposure, Mercer also noted
an increase in foreign assets relative to domestic assets. As a portion
of the overall equity portfolio, average foreign exposure increased from
45% to 49%, with even-more-pronounced movements in fixed income, where
foreign exposure moved from 16% to 23%. This shift was notable in Japan,
South Korea, Malaysia and Taiwan as investors sought greater geographic
diversification.
Fiona Dunsire, Mercer’s Wealth Leader for Growth Markets commented,
“Investors across Latin America, the Middle East, Africa and Asia are
faced with a number of challenges: they seek to achieve better
investment outcomes, but in many cases also face regulatory restrictions
on the amount of assets they can invest outside their home country, all
while addressing ongoing political, economic and demographic shifts.”
She continued, “As investors diversify their portfolios globally, they
need to assess how to access the best investment opportunities, and at
the right cost.”
Janet Li, Mercer’s Wealth Leader for Asia, said many countries in Asia
were seeing evolvements and imminent changes in their pension systems.
“Like other growth markets, Asia is seeing pension reviews and reforms
with both the establishment of new and enhanced pensions systems, and a
general shift towards defined contributions, away from defined benefit
plans,” Ms Li said.
“With more than half of the world’s middle-class residing in Asia and
evolvements in pension structure and delivery, effective investment
solutions are essential to meeting the future needs of Asia’s ageing
societies,” she said.
Regional Breakdown
Asia
Within Asia, we observed materially different allocations from one
country to the next. In Thailand and Indonesia, high fixed income and
cash balances are prevalent (Thailand’s fixed income allocation was 73%,
while Indonesia’s cash balance totaled 45%). Conversely, Hong Kong’s
equity allocation of 66% was the highest in Asia, driven largely by
Mandatory Provident Fund elections to lifestyle and standalone equity
funds. Japan, South Korea, Malaysia, and Taiwan fell in the middle, each
holding between 38%-44% equity. South Korea (11%) and Taiwan (9%) had
the largest exposures to alternatives.
Japan (+13%) and South Korea (+8%) posted material increases in their
equity portfolios over the period as they sought opportunities to
increase expected return. There was a notable shift from domestic assets
to foreign assets, particularly in Japan, South Korea, Malaysia, and
Taiwan, as investors sought greater geographic diversification.
Notes to Editors
The survey reflects different reporting dates by source, though all
“current” sources are from 2017-2018 across Latin America, the Middle
East, Africa and Asia. 14 jurisdictions are represented in the report
data (Argentina, Brazil, Chile, Colombia, Mexico, Peru, South Africa,
Hong Kong, Indonesia, Japan, South Korea, Malaysia, Taiwan and
Thailand). Prior data comparisons are generally five years prior to the
date of the “current” source, but again varies based upon data
availability.
Aggregated data was compiled on an asset-weighted basis; therefore,
investors with large asset bases skew the data results more so than a
smaller investor. Information contained herein has been obtained from a
range of third-party sources. Although the information is believed to be
reliable, Mercer has not sought to verify it independently.
About Mercer
Mercer
delivers advice and technology-driven solutions that help organizations
meet the health, wealth and career needs of a changing workforce.
Mercer’s more than 23,000 employees are based in 44 countries and the
firm operates in over 130 countries. Mercer is a wholly owned subsidiary
of Marsh
& McLennan Companies (NYSE: MMC), the leading global
professional services firm in the areas of risk, strategy and people.
With 75,000 colleagues and annualized revenue approaching $17 billion
through its market-leading companies including Marsh,
Guy
Carpenter and Oliver
Wyman, Marsh & McLennan helps clients navigate an increasingly
dynamic and complex environment. For more information, visit www.mercer.com.
Follow Mercer on Twitter @Mercer.
1 Data as of the most recent date available for each country;
please consult the full report for details.
Contacts
Yumeko Leung
+61 447 042 101
[email protected]
