ASIA - Asia ex-Japan and Australian assets are set to double by 2015, reaching $4tr, according to a recent study by Cerulli Associates.
Assets have already increased from $1.2trn in 2006 to $2.2trn at the end of last year and at least half of the current assets are run in the institutional market, according to the Picking High-Hanging Fruit: Competition Intensifies Between Asian Managers and Foreign Firms report.
New pools of insurance and retirement assets and increased interest from foreign investors are being fuelled by an expanding middle class found the report, which was co-sponsored by Mirae Asset Global Investments Group and Citigroup.
China is likely to be the driving force of this growth through increasing institutional development and onshore mutual funds. The National Social Security Fund, one of China's largest pension funds had $130bn under management at the end of 2010.
Korea is also set to be a considerable factor in the region's growth, with $285bn in its National Pension Fund, which now accumulates around $2bn a month in inflows due to a broadening of its coverage to much more of the national population.
The survey also found that pension funds are increasingly interested in equity and a greater range of asset classes, rather than debt investments. The Korean National Pension Service is leading the way, with voiced plans to put as much as $4bn into alternative assets such as hedge funds, private equity and infrastructure.
The survey reports that less than 20% of pension funds are managed externally, due to an increase in institutional client sophistication. External managers in the region will increasingly be expected to deliver highly specialized portfolio management skills, or alternatively very cheap, passive strategies that will be more cost efficient than in-house strategies.
Other findings include the significant rise in the ETF market. According to data provided by BlackRock, ETFs have a firm presence in the Asian market with $60bn assets under management. Australian ETFs in particular have had a year of expansion, with numerous new products and an increase from just three a few years ago to currently more than 50.
Thailand and India are also seeing new trends in pension funds the report said, with the launch of a National Savings Fund in Thailand where the government has committed to matching voluntary donations. A similar system was launched in India in 2009 that is available to all Indian citizens who are not government employees.
While these developments are all positive, some managers interviewed for the report believe there is a mismatch between demographic drivers and the pace of regulation.
One manager active in the region quoted in the survey said: "Relative to the US and Australia, there is a lot more to do in regulation in order to be able to support a sustainable private pension fund industry in Asia."
"The pace of regulation is too slow, the tax incentives are just not there, and a lot of fee regulations do not have enough protection or incentives to create economies of scale."
The Centre for Social Justice is calling for the state pension age to be raised to 70 by 2028 and to 75 by 2035, a much faster rise than currently planned.
The High Court has blocked the £12bn transfer of Prudential's annuity book to Rothesay Life, citing the insurer's lack of "established reputation" and differing "capital management policies".
Jonathan Stapleton speaks to Punter Southall Governance Services director of outsourced pension services Clare Owen about the firm's latest reseach into the effectiveness of trustee boards.