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Asian institutional investors’ confidence level riding high
Confidence among Asian institutional investors is currently riding very high, according to the 2014 Pyramis Global Advisors’ institutional investor survey. Nearly all (99%) pension plans and other institutional investors surveyed in Asia ex Japan in the survey believe they can achieve their target returns in five years
The Asset 28 Oct 2014
Confidence among Asian institutional investors is currently riding very high, according to the 2014 Pyramis Global Advisors’ institutional investor survey.
 
Nearly all (99%) pension plans and other institutional investors surveyed in Asia ex Japan in the survey believe they can achieve their target returns in five years, a notably higher level of optimism than the average among their global counterparts (91%).
 
Asian (ex Japan) institutional investors are also looking for higher returns, with an expected mean return of 10.94%, the highest among the institutional investors polled in the survey (8.46%). The survey, which includes 811 respondents in 22 countries representing more than US$9 trillion in assets, also revealed that Asia ex Japan is the only region worldwide where institutional investors expect on average a double-digit return rate for their portfolios. In Asia ex Japan, CEOs, COOs, CFOs, and CIOs from 88 pensions, insurance companies and financial institutions were polled.
 
Daisy Ho, head of institutional business, Asia ex Japan, Fidelity Worldwide Investment, sole distributor of Pyramis’ institutional investment products outside North America, says: “Amid global economic volatility, institutional investors in Asia ex Japan are still confident of meeting their return targets. As the size of their assets grows, Asian institutions are not only looking to find adequate returns, but also diversify their portfolios and mitigate risk. Against a backdrop of many Asian countries having a strong reform agenda, the survey shows that Asian institutional investors see regulatory changes as the biggest risk.”
 
Compared to the global view where volatility (22%) is regarded as the top concern, Asia ex Japan institutions rank volatility (20%) as their third-biggest concern, following regulatory and accounting changes (28%) and risk management (23%). Regulatory changes (30%) are considered the biggest risk for Asian ex Japan institutions followed by geopolitical (22%) and longevity risks (15%). An overwhelming number of North American institutions consider interest rates the biggest risk to their portfolio, which has propelled interest rates to be the top risk from a global perspective.
 
Asian institutions outside Japan are typically looking for growth, with an overwhelming majority (77%) listing capital growth as their primary investment objective. This is triple the average global level (25%). For institutions in Japan, capital growth (35%) and preservation (35%) are equally important. For US pension plans, funded status growth is the primary investment objective, but levels differ between public plans (62%) and corporates (37%).  Institutions in Europe are primarily focused on capital preservation.
 
Outside the US and Canada, volatility expectations over the long term are quite low with a decrease in the frequency of boom/bust cycles expected in Asia ex Japan, Japan and Europe. Ninety-three percent of Asia ex Japan institutions expect volatility to decrease, while only 6% expect an increase in volatility.
 
Emerging Asia appears to be the most attractive market for Asian institutions: 74% of them think emerging Asia offers the best medium-term growth prospects over the next three to five years, followed by developed North America (10%) and developed Asia (7%). The survey also reveals the active management preferences of Asian institutional investors, with 93% of them preferring to increase their allocation to equities in the near term. Only 58% of them would increase fixed income allocation.
 

    

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