Assets outsourced to external money managers by institutional investors in the Asia-Pacific region are set to grow at an annualized rate of 9% over the five years through 2024, down from 12% over the five years through 2019, according to a report by fintech firm Broadridge Financial Solutions.
The slowdown is partly in response to the fallout from COVID-19, including moves by some retirement systems in the region to allow members to draw down their retirement savings to get through the crisis, Evonne Gan, associate director of APAC insights at Broadridge, said in an interview.
That 9% pace through 2024 would lift outsourced assets to roughly $17.4 trillion from $11.3 trillion at the end of 2019.
Assets from Japanese and Chinese institutional investors would account for two-thirds of that total as "demographic shifts push pensions to expand their investment reach and insurance assets continue to grow," the report said.
Outsourced – or "addressable" – assets rose to 17% of total Asia-Pacific institutional assets by the end of 2019 from 14% five years earlier. The weight of outsourced assets should grow to 20% by the end of 2024, the report said.
Bonds and stocks will continue to account for the lion's share of assets entrusted to external managers over the coming five years, falling one percentage point each to 48% and 31%, respectively. Alternatives, meanwhile, are expected to account for 10% of outsourced assets by the end of 2024, up from 7% at the end of 2019, with the remainder comprised of cash, mixed strategies and "other" assets.
Assets awarded to external managers by Asia-Pacific pension funds are set to grow at an annualized pace of 7% over the coming five years, down a bit from an 8% pace over the five years through 2019.
Assets outsourced to external managers by insurers should continue to post especially strong growth, albeit from a lower base, Ms. Gan said. Over the coming five years, insurance assets entrusted to managers are expected to see annualized growth of 11.8% to $1.2 trillion, the report said.