Mon, Aug 31, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Cerulli expects global defined contribution pensions’ assets to reach $13.7tln by 2016

Thursday, November 01, 2012
Opalesque Industry Update - Overall, Cerulli Associates expects global defined contribution (DC) assets to reach US$13.7 trillion by 2016, which equates to a 7.5% compound annual growth rate (CAGR) over five years.

Australia will retain its position as a significant market relative to the size of its population. In absolute terms it will be the third largest market after the United States and the United Kingdom in 2016. The United Kingdom is the only market with assets in excess of US$1 trillion that is expected to have double-digit growth. Asia ex-Japan shows immense potential with Korea and Taiwan registering the strongest growth rates across the region. Countries such as China, Hong Kong, and Thailand have also made their mark with growth rates expected to be more than 10%.

These are just some of the findings from Global Defined Contribution Pensions 2012: Identifying Market Opportunities, a global DC pensions report from Cerulli Associates.

Defined contribution pension plans will be the fastest-growing source of business in Europe this year, according to the report's survey of 20 international investment firms with a total of €1.7 trillion (US$2.1 trillion) in European assets under management. Germany, the United Kingdom, and the Netherlands were flagged as offering the best business opportunities; the former for its potential and the latter two markets for sheer size and sophistication. Although relatively rich countries, they have a long way to go to reach U.S. levels of penetration.

Growth can be tapped in apparently disparate markets, but there is very little synergy to harness across different countries, even when they are in the same region. Identifying the gatekeepers is the easy part; winning mandates is a more complex challenge. While it is possible to identify common themes, much also depends on the country's regulatory environment and investment heritage.

"Performance is considered an important attribute by most European trustees and consultants, but low fees act as a trump card in competitive tenders in Italy," said Barbara Wall, director at Cerulli Associates. "In Germany it is steadiness of returns and a coherent investment strategy that win. In the Netherlands and the Nordic region expertise in proven alpha niches is a competitive advantage, whereas in France it is an association with an insurance company that holds sway."

"In broad terms, fund managers are reacting in two main ways to protect investors against uncertainty," commented Yoon Ng, a Cerulli associate director. "One response is to move toward target-date funds that are geared toward retirement at a particular time in the future. This approach is well established in the United States, but it is also gaining traction in the United Kingdom and Latin America. An alternative response is to offer products with some sort of guarantee. Germany, Japan, and Italy have a strong predisposition toward guaranteed products."

Wall added, "Product mix in the DC space may be very different from that in DB but key investment themes are similar-income certainty, inflation protection, and volatility minimization. As the size of the DC asset pool grows, there will be heightened demand for foreign investment as well as specialized products."

Other Findings:

• Pressure on fees is one trend that is close to being truly universal. Virtually all investors polled in the Nordic region, the United Kingdom, and the Netherlands told Cerulli the crisis has prompted them to negotiate fees more vigorously. These same interviewees also said they were prepared to share extra returns with managers that could deliver stable performance. Continuity in returns was the common requirement and a key to new business.

• There is great diversity in the use of consultants. In the United States they play a substantial role in larger schemes and increasingly in mid-market ones too. In the United Kingdom they are influential in decisions made by pension schemes on platform selection, manager selection, and asset allocation. Elsewhere they typically play a more limited role. It is notable that consultants were seen by a significant margin of survey respondents as being the most important channel for growing European DC business this year.

(press release)

Bg

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - Hedge funds suddenly find real money is back in Argentina's debt, Elon Musk buys more SolarCity stock following hedge fund manager short, BlackRock plans to get into rental-home financing[more]

    Hedge funds suddenly find real money is back in Argentina's debt From Bloomberg.com: The real money is back in Argentina. Before the country’s default in July 2014 (its second in 13 years), most long-term investors abandoned its bond market. As they rushed out, Argentina became a favorit

  2. Activist News - Carl Icahn has snapped up a huge stake in Freeport-McMoRan, and the stock is ripping, Meet Europe's best activist investor[more]

    Carl Icahn has snapped up a huge stake in Freeport-McMoRan, and the stock is ripping From Businessinsider.com: Carl Icahn has picked his next target: Freeport-McMoRan. Icahn and a group of other investors have snapped up an 8.46% stake in mining company Freeport-McMoRan, according to a j

  3. North America - Hedge fund manager Ray Dalio’s challenge to the Fed[more]

    From Newyorker.com: For some reason, Janet Yellen, the chair of the Federal Reserve, decided to skip this year’s annual Fed conference in Jackson Hole, where monetary policymakers from the United States and abroad get together with some prominent academics to discuss the big issues of the moment. Th

  4. Opalesque Exclusive: Credit-focused hedge fund Numen Capital expects more volatility in Europe in coming months[more]

    Benedicte Gravrand, Opalesque Geneva: A London-based hedge fund, which has just hired two emerging managers, is cautious on Europe. Vassilis Paschopoulos and former Lehman’s colleague Nikos Kargadouris, launched a London-based credit-focused hedge fund called

  5. Performance - Hedge funds bruised by stocks’ meltdown, Capstone’s volatility hedge fund is having a monster month thanks to market mayhem[more]

    Hedge funds bruised by stocks’ meltdown From WSJ.com: Hedge-fund managers like to promise their investors protection from market swings. In the recent stock swoon, many were caught off guard. Billionaire managers such as Leon Cooperman, Raymond Dalio and Daniel Loeb are deeply in the red

 

banner