After eye-witnessing Asia's boom, more pension fund attendees of Pensions & Investments' Australian conference are likely to consider targeted Asia-Pacific investment accounts, some attendees held.
"For the past six months, I've been researching the possibility of having Pacific ex-Japan account as the best way to invest in this (Asian) region," said James Koltes, asset allocation chairman of the $130 million Navy-Marine Corps Relief Society, Washington.
Sometime this year, that fund is likely to boost its international allocation to about 15% to 20% of assets from less than 4% now. Part of the allocation would include an Asia minus-Japan account. Currently, all international holdings are invested in a global arbitrage account. Mr. Koltes said the Relief Society fund could consider a restructuring whereby the Japan investments are kept in an arbitrage account, while the fund adds to that a broad international mandate and a Pacific ex-Japan account.
Peter Smith, secretary and executive officer of the Queensland, (Australia) Local Government Employees' Superannuation Fund, said while his fund currently has "no direct commitment to Southeast Asia, we're looking at it."
Citing data from the conference, Mr. Smith pointed to economic growth of the region that "is five times greater than Great Britain's during its industrial revolution."
Conferees, representing pension funds totaling $300 billion in assets - most from the United States - attended the Feb. 5-13 conference organized by Bell Securities of Sydney, Australia, and sponsored by 18 money management firms. The conference, which took place in Sydney, Singapore, and Jakarta and Bali in Indonesia, featured a variety of presentations on how to capitalize on Asia's economic growth.
Many attendees evidently were impressed. Although not all of them believe in setting up separate Asian accounts, quite a few delegates, such as those from the $400 million Middlesex County Retirement System, East Cambridge, Mass., and the $6 billion Louisiana Teachers' Retirement System, Baton Rouge, recently have raised, or expect to raise, their fund's overall international exposure.
Edward Alter, Utah state treasurer, pointed out that although the $6.3 billion Utah State Retirement System already had 18.3% of its assets overseas at the end of 1993, he would like the foreign exposure to reach 20% to 25% of assets, which "I'll discuss with fellow board members."
Mr. Alter noted that trips abroad such as this one have helped confirm the merits of foreign investing.
In Utah's case, overseas holdings by the state fund doubled to its current amount "in the 15 months since the last (Bell Securities-organized) conference," he reported.
Colin Bell, chief executive of Bell Securities Ltd., said he expects to hold yet another conference "somewhere in the region. It's a great story," he said, of a region with "spectacular growth and investment opportunities. But ... a big section of the U.S. market hasn't yet participated in it."
February's program stressed opportunities in Asia as well as Australia's role as a gateway to them.
Among the points stressed: Australia was continuing to tighten its links to high-growth Asia; and the boom in Asia is no short-term froth.
A variety of factors - from expanded trade opportunities to continuing direct foreign investments to the rapid expansion of a middle class - are expected to sustain Asia's growth.
Attendees also heard of ever-expanding ways to capitalize on the opportunity via direct investments and securities holdings. (But some attendees complained of limited information on investment exit strategies.)
Explaining Asia's new-found potency, Laura Luckyn-Malone, senior vice president at Schroder Capital Management in London, cited its "substantial wealth creation, dynamic industrialization and broadening of its stock markets." The ranks of rich and middle-class are exploding while poverty continues to shrink.
For instance, she reported that only 10% of Asians live in poverty, even after a 40% growth in the population in the last 23 years, compared with 33% impoverished in 1970.
Helped by high savings rates, the region is also "awash in cash," and "much will find its way into" Asia's mushrooming stock markets, she added.
In Malaysia, for example, the market's capitalization has leapt to more than $200 billion from $23 billion in 1983. In Indonesia, the current market cap of $37.5 billion compares with about $100 million in 1983.
Government officials pointed to trade liberalizations and other market-opening reforms that have boosted the region's growth and attractiveness. In Indonesia, government officials projected 6.2% annual economic growth over the next five years as trade expands and the economy is further diversified and industrialized.
Stock market enhancements will continue, even as market capitalization is projected to rise, attendees were told.
Among other improvements will be the advent of fully computerized trading (and with it increased market surveillance by supervisory authorities), coming with the scheduled September opening of new Jakarta stock exchange. But the stock market still isn't fully opened: dispelling earlier rumors, officials said Indonesia will for now retain its 49% cap on foreign stock ownership.