UK - Asian equities exposure among pension funds increased by 6.1% to 13.2% over the last year, a poll by Baring Asset Managment has revealed.
The Barings UK pension fund poll was conducted amongst 24 of the top 40 schemes, representing a combined £40bn of invested assets.
Emerging Asia was considered the region with the most potential for investment gains over the next 10 years. This year China overtook Korea as the favourite market in terms of investment prospects over the next 12 months.
However, despite the positive sentiment on the Asia investment prospects, the Barings poll showed only 8% of schemes were actually planning to increase their exposure to Asian equities within the next 12 months. The vast majority, that is 75%, expected their allocations to remain the same.
When asked whether a global economic slowdown would increase or decrease their allocation to Asian equity markets, 14% of schemes thought that their allocation would decrease while 76% admitted it would remain the same.
The US ranked at the bottom of the list when it came to pension fund confidence in investment prospects.
The poll also showed an increase in general equities allocation, with 70.8% invested by schemes this year compared to 59.8% in 2005.
The majority of respondent schemes did not invest in hedge funds and over half (54%) said they would not even consider investing in either single strategy or fund of hedge funds. The average allocation to the asset class was 3.4%, although 17% of the schemes were actually invested in the space.
Michael Hughes, CIO, Barings, commented: “In our view, Asia offers UK pension funds the best growth potential for the long term, and we still believe that many schemes have too little invested in Asian equities. Indeed over the past year, Asia has been a potent MSCI region and this performance looks set to continue.
“We suggest schemes start to place greater emphasis on exploiting the scope for excess returns through alpha strategies as the region is re-rated. What happens in Asia over the next five years will have a dramatic impact on world markets but it is the domestic Asian story that presents the most exciting opportunities for investors."
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