Asia-Pacific’s seven top pension markets – Japan, Australia, South Korea, Malaysia, China, Hong Kong and India – saw their assets under management climb by 11.6 per cent in 2019, according to Thinking Ahead Institute’s Global Pension Assets Study released Monday.
Japan is the largest of Asia’s pension markets, followed by Australia, with both countries in the top seven pension markets globally, the study said.
“Asia Pacific (APAC)’s pension markets continue to be a hive of activity, with South Korea and Hong Kong experiencing the highest growth rates for total assets globally, and Australia ranked as the most successful pensions market worldwide,” Jayne Bok, head of investments for Asia at advisory Willis Towers Watson, said in the statement.
“However, looking at 2019, growth of the seven largest APAC pension markets was slightly slower than the overall growth of the 22 largest pension markets. This is partly due to the lower allocation to equities and alternative investments within the region,” she said.
Bok added that to sustain their growth, APAC pension funds will need to start embracing sustainability, ESG and long-horizon investing.
“The region has lagged in this area for many years, but with sustainability and climate change becoming significant for the industry, such issues can no longer be ignored,” she said.
For the 10 years ended in 2019, the fastest-growing pension markets by total assets were South Korea, which posted a 12.4 per cent rise, Hong Kong, up 9.2 per cent, and the U.S., up 7.8 per cent, the statement said.
Japan has 7.2 per cent of pension assets globally, the third-largest proportion after the U.K.’s 7.4 per cent and the U.S.’s 62 per cent, the study found.
Overall, global institutional pension fund assets climbed 15 per cent in 2019 to $46.7 trillion in the top 22 pension markets, the statement said.
Allocations toward alternative assets continued to see increases, the study found, with the top seven pension markets posting an around 23 per cent allocation to private markets and other alternatives in 2019. That compared with just 6 per cent in 1999, the study showed.
The shift was largely due to the shift away from equities and bonds, the study said, with the average top seven markets now allocating 45 per cent to equities – down 16 percentage points since 199 — 29 per cent to bonds, 23 per cent to alternatives and 3 per cent to cash.
The Thinking Ahead Institute was set up in 2015 as a not-for-profit investment research group, and it is part of Willis Towers Watson Investments’ Thinking Ahead Group, the statement said.