STAMFORD, Conn. -- When U.S. pension funds invested overseas last year, the results looked familiar.
For the third consecutive year, 10% of total U.S. pension assets -- about $638 billion -- was invested overseas. But tax-exempt institutions saw their cross-border investments grow 16% in 1998.
"EAFE is still the cornerstone" of pension funds' overseas investment programs, said Carol Parker, vice president of research for the Stamford, Conn.-based InterSec Research Corp., which conducted the survey. Mandates in the style of the Morgan Stanley Capital International Europe Australasia Far East index -- about 78% of all non-U.S. portfolios -- picked up assets from regional mandates, she said. "The only regional mandate surviving was European equities."
Emerging markets managers appeared battered, but not beaten. Net flow into emerging markets mandates was $6.5 billion, about 40% less than the $10.8 billion in 1997.
"Plan sponsors were looking at emerging markets long term," she said. Despite the dramatic falloff in emerging markets last year and investor wariness, "several managers convinced sponsors it was a good time to invest in emerging markets."
In all, market appreciation contributed $66 billion in growth to tax-exempt investors' international portfolio. Net cash flow from sponsors was $23 billion, less than any year since 1982.
InterSec polled 200 money managers for the survey.