More than 80% of respondents to the Global Pensions 100 Panel believe a 50% allocation to emerging markets is too high.
The findings follow a recommendation by Ashmore head of research Jerome Booth that pension funds should be investing at least 50% of their assets in emerging markets. (Read the full story on www.globalpensions.com)
He said trustees and investment boards regard such economies as high risk, even when all the evidence points to the contrary, and believes emerging market debt and, to a lesser extent, equities, are currently safer than developed markets.
However, 80.95% of respondents to our survey felt the figure was unacceptable, with many arguing that emerging markets were still too volatile for such a large allocation.
One said: “An allocation such as this would present an abundance of risk and volatility in the portfolio over the short term. I don’t believe the board would have confidence in such a strategy.”
Another added: “I agree with most of Jerome Booth’s assertions regarding the emerging markets. Most pensions are significantly under-invested and should have a much larger allocation to the emerging market space. Emerging market local currency debt is particularly attractive relative to the debt available in most of the major developed markets.
“However, emerging markets still have additional legal and regulatory risks that should be considered and the emerging markets typically demonstrate greater volatility than the markets of the US and western Europe.”
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