Pension asset allocation insights 2022 

  • Author
    Tracy Teel
    Regional Wealth Strategy Leader
  • Author
    Simon Coxeter
    Director of Strategic Research, AMEA and LatAM
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

  • Changing of the guard
    Understanding 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.
  • Position for transition
    How 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.
  • Modern diversification
    How 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

  • Allocations remain steady
    Overall asset allocation has remained steady. However, in some jurisdictions we see increased allocations to equities, with more foreign diversification and alternatives.
  • Mounting interest in sustainable investing
    Sustainable 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.
  • Investors are responding to inflation and other market pressures
    Monetary 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 

Our analysis over many periods shows that a 60/40 equity/fixed income portfolio could have been better positioned to capture opportunities if alternative strategies had been integrated. For this reason, itis a good idea to explore alternative strategies such as private equity, private debt, real estate, and infrastructure to see how they might complement your existing portfolio.

We believe that many investors would benefit from having a larger allocation to China’s onshore market through a dedicated China equity allocation. 

When inflation first started to climb following the pandemic, expectations were for a transitory affect. Yet it has proved stickier than many predicted. Now is a good time to assess your portfolio’s sensitivity to inflation and consider any appropriate changes. Read our latest thinking on inflation.

Many institutional investors are establishing sustainable investing beliefs and begin to implement them in their investment programmes. These include the development of total portfolio climate transition plans. Find out more our investing sustainably beliefs and actionable strategies for investors.

While many investors face investment restrictions and other factors leading to a large domestic allocation, there are a number of reasons to consider diversification beyond your domestic market. Our stuck at home paper provides more insights.

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
Related solutions
Related insights

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.
Download this report

Related content

    Investment solutions to suit your needs

    • Implementation and Implemented Investment Consulting

      We can help you define, develop and implement your investment strategy by addressing areas such as governance, risk, sustainability and diversification. We flex our services to suit your needs and help you achieve your investment goals.

    • Sustainable investments 

      We help you build a sustainable investment strategy that integrates environmental, social and governance (ESG) considerations; diversity, equity and inclusion (DEI) factors and seeks an optimal mix between positive change and favourable returns.

    • Alternative investments

      Leveraging our existing relationships with hundreds of asset managers around the world, we can help you identify and source new investment strategies, opportunities, ideas and innovations across private markets and hedge funds. 

    • Strategic research 

      Become a member of the MercerInsight® Community today to get access to strategic research from hundreds of thought leaders around the world, including Mercer and third-party publishers. It’s complimentary and easy to join.

    • Asset manager research 

      By subscribing to MercerInsight®, an alliance with eVestment, you can gain access to data, analytics and our forward-looking research on asset managers and thousands of investment strategies across both public and private markets. 

    • Managing investment risk

      Our Mercer Sentinel team can help you conduct due diligence and mitigate operational risks across your portfolios and strategies. We assess asset managers, custodians and other service providers to help you deliver on your governance objectives.

    MercerInsight® Community

    MercerInsight Community curates the latest strategic research from Mercer and hundreds of third-party publishers and asset managers. While some articles are featured here, most are reserved for members. Membership is complimentary and it’s quick and easy to join.
    Join the community

    Contact our specialists to see how we can help you with your asset allocation and portfolio strategy

    Previous report editions:

    See our Important Notices