Join us for our Global Investment Forum - Asia I 21-22 September, 2022 in-person in Singapore or virtually


Created with Sketch.
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 capitalize 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.
Created with Sketch.

Fiona Dunsire, Regional Wealth Leader, AMEA and Latam

Three asset allocation themes for investors to consider

We have identified three overarching themes that will affect investment decisions in 2022 and beyond:

 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 Center (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 pension asset allocation trends in 2022

 Allocation 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 programs.

Investors are responding to inflation

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

Each investor has unique circumstances, risk tolerances, liquidity needs and objectives. The actions suggested here are expected to benefit a broad range of investment portfolios; however, you should consider your own needs before taking action. Speak to your Mercer consultant or contact us to connect with a specialist.

  • Exploring alternative strategies

    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, it is 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.

  • Challenging your home bias

    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.

Allocations as a % of aggregate assets


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

Note: Data may not sum to 100% due to rounding.


 

 

 

 

Mercer’s Asset Allocation Insights 2022 report provides a comprehensive overview of asset allocation trends across Asia, the Middle East, and Africa and Latin America.

Meet the authors

Fiona Dunsire

Regional Wealth Leader, AMEA and LatAm

  • About Fiona

    Fiona is an energetic leader with a record of successful business and people management across pensions and investments. With over 30 years of experience with Mercer, she has led with both clients and the business, as UK Investments business leader and Mercer UK CEO.

     

    In her current role, Fiona works with teams across the world in developing our strategy and business further. She has represented Mercer to regulators and government agencies and worked on multiple complex client and business projects. She is currently supporting the partnership with the World Economic Forum on Transformational Investment and a member of the World Economic Forum Future Council for Investing.

     

    Fiona is an active advocate for diversity and mentor future leaders and women in business. She is interested in many things: art, film, dance; outdoor activities including cycling and golf; learning Spanish (badly); cooking and crafting. Connect with Fiona on Linkedin.

Tracy Teel

Regional Wealth Strategy Leader, AMEA and LatAm

  • About Tracy

    Tracy collaborates with Mercer colleagues around the world to better serve clients in Latin America, the Middle East, Africa, and Asia, and support strategic partnership and acquisition activity in these regions.

    Prior to her current role, Tracy spent approximately 10 years providing a range of investment consulting services to institutional investor clients, primarily for corporate defined benefit and defined contribution plan sponsors.

    She graduated from Wake Forest University (Go Deacs!), and is a CFA charterholder and a member of the CFA Institute and the Atlanta Society of Finance and Investment Professionals.

Simon Coxeter

Wealth Strategic Research Director, AMEA and LatAm

  • About Simon

    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.

Related insights

 

Mercer Global Investment Forum Asia

 

21-22 September I – In-person in Singapore or virtually

 

Explore asset allocation, new investment ideas and opportunities, private markets, sustainable investment and implementation. 

Download the report

Please complete the form below to download a complimentary copy of this new research report.

*Required Fields

 

Important notices

References to Mercer shall be construed to include Mercer LLC and/or its associated companies.

© 2022 Mercer LLC. All rights reserved.

This content may not be modified, sold or otherwise provided, in whole or in part, to any other person or entity without Mercer's prior written permission.

Mercer does not provide tax or legal advice. You should contact your tax advisor, accountant and/or attorney before making any decisions with tax or legal implications.

This does not constitute an offer to purchase or sell any securities.

The findings, ratings and/or opinions expressed herein are the intellectual property of Mercer and are subject to change without notice. They are not intended to convey any guarantees as to the future performance of the investment products, asset classes or capital markets discussed.

For Mercer’s conflict of interest disclosures, contact your Mercer representative or see http://www.mercer.com/conflictsofinterest.

This does not contain investment advice relating to your particular circumstances. No investment decision should be made based on this information without first obtaining appropriate professional advice and considering your circumstances. Mercer provides recommendations based on the particular client's circumstances, investment objectives and needs. As such, investment results will vary and actual results may differ materially.

Information contained herein may have been obtained from a range of third party sources. While the information is believed to be reliable, Mercer has not sought to verify it independently. As such, Mercer makes no representations or warranties as to the accuracy of the information presented and takes no responsibility or liability (including for indirect, consequential, or incidental damages) for any error, omission or inaccuracy in the data supplied by any third party.

Investment management and advisory services for U.S. clients are provided by Mercer Investments LLC (Mercer Investments). Mercer Inv