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Cerulli survey shows that Asian institutions increasingly outsource their assets to external managers

Monday, November 14, 2011
Opalesque Industry Update - Research firm Cerulli Associates predicts that by the end of 2011, US$1.07 trillion of Asian institutional assets will be accessible to external managers. This figure shows that 11.4% of the Asia ex-Japan region’s total investable assets will be going to external managers, an upward revision from Cerulli’s previous forecast. Institutional investors in the region have continued to outsource assets as they recovered from the 2008-9 financial crisis.

Institutional investable assets in the region totaled US$8.6 trillion by December 2010, a 13.2% rise from end 2009, according to the Cerulli Quantitative Update: Institutional Asset Management in Asia 2011. The figure shows a compound annual growth rate of 18.9% between 2006 and 2010, as assets doubled in absolute terms over the same period.

Looking forward, Cerulli estimates that, as long as there are no more major market or policy related incidents, investable assets will expand to US$13.6 trillion by 2015, of which they expect 12.7% will likely be outsourced to external managers by 2015.

“The extent of outsourcing varies among types of institutions. For example, Asian state pension funds’ proportion of outsourced assets is growing faster than average, having expanded to 18.7% in 2010 from 10.8% in 2006,” said Ken Yap, Cerulli’s Singapore-based director and head of Asia-Pacific research. “On the other hand, institutions like corporates/commercial banks and insurance firms still prefer to manage much of their money internally.”

There has been a change in external managers’ appetite for investing on behalf of institutions since the financial crisis, according to Cerulli. “Although state pensions’ outsourcing has been growing relatively fast, pension funds are no longer the most attractive source of institutional assets for external managers” the firm says. The survey in 2009 shows that external asset managers regarded pensions as the most significant source of institutional assets. However, more recently, central banks and quasi-government organizations have replaced pensions as the biggest source of institutional assets. Cerulli believes that this could partly be due to stiffening competition for pension funds’ mandates. Source

Beverly Chandler

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