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Pension asset allocation insights 2022
July 22, 2022
Asset allocation is one of the most important decisions an investor makes
A thorough assessment of risks is critical to constructing a portfolio that seeks to meet your objectives, while also being positioned to capitalise on opportunities and mitigate unforeseen risks in a timely manner. To help inform asset allocation it can be useful to review portfolios against the trends of global institutional investors and peers around the world.
Three asset allocation themes for investors to consider
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Changing of the guardUnderstanding the effects of the changing fortunes of economic players and ways of thinking that have held sway for a long time, including the evolving objectives of monetary policies; the prospect of an “Asian century” and the dramatic re-shaping of how finance is provided.
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Position for transitionHow investors should plan for the changes required to put us on a more sustainable path; the role of impact investing; the management of resources to facilitate the green transition; and the power that can be exercised through engagement.
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Modern diversificationHow portfolios should be reinvented to hit target returns while maintaining protection; the use of dynamic asset allocation between strategies and themes; and how to gain access to emergent innovators.
Pension asset allocation trends in Asia, Middle East, Africa and Latin America
In July 2022, we launched a report that provides a comprehensive overview and actionable insights for investment allocation trends across Asia, the Middle East, and Africa (AMEA) and Latin America. We cover US$5.9 trillion in assets under management across fifteen jurisdictions, including a new entrant this year, the Dubai International Financial Centre (DIFC). Mercer specialists in various regions and our partners – El Dorado Investments and Alexforbes – have also shared their insights across twenty markets. More information on the structures of many of these pension systems can be found in the Mercer CFA Institute Global Pension Index Report.
Key asset allocation trends in 2022
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Allocations remain steadyOverall asset allocation has remained steady. However, in some jurisdictions we see increased allocations to equities, with more foreign diversification and alternatives.
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Mounting interest in sustainable investingSustainable investing is demanding the attention of many investors and regulators, with a wide range of initiatives across different markets working towards greater integration of environmental, social and governance factors in investment programmes.
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Investors are responding to inflation and other market pressuresMonetary policies are being reshaped as inflation balloons past central bank targets, and policymakers are grappling with the consequences of bloated balance sheets, the potential economic impact of higher interest rates and disrupted global supply chains.
Five actions investors should consider for asset allocation
Overall allocation observations
49%
fixed income,
compared to 50.6% the prior year
38.5%
equities,
compared to 36.1% the prior year
3.9%
alternatives,
compared to 4.3% the prior year
4.1%
cash,
the same as the prior year
4.6%
other,
compared to 4.9% the prior year
Meet the authors
Tracy Teel
Simon Coxeter
Simon is Mercer’s Director of Strategic Research for AMEA and Latin America, based in Singapore. He also evaluates investment strategies as a member of Mercer’s Equity Boutique and Diversifying Alternatives Boutique. Additionally, Simon has performed advisory engagements with a range of clients across a number of investment-related issues.
Before joining Mercer in 2010, Simon was Managing Director in a Swiss-headquartered private equity firm. Prior to that, he co-founded AsiaSource Capital, a boutique investment firm based in Singapore and New York, where he managed a fund-of-hedge-funds. Earlier in his career, Simon worked in Hong Kong as a sell-side equity analyst at Cazenove, having started his career as a global equity analyst at Prudential M&G in London.
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Asset allocation insights 2022
This report provides a comprehensive overview and actionable insights for investment allocation trends across Asia, the Middle East, and Africa (AMEA) and Latin America.
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