Fri, Apr 25, 2014
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   |   
Banner
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. Opalesque Exclusive: Rainwater and Blue Sky - an Australian water fund emerges[more]

    Bailey McCann, Opalesque New York: Financial reporters often tout new funds and investments as uncorrelated investments, but few can say they are uncorrelated to everything but weather. Enter Blue Sky Alternative's water fund which invests in the permanent rights to Australia's water. Sev

  2. Regulatory – Expect greater SEC scrutiny of hedge funds that share information or collaborate in advance of their trades, Alternative funds to get SEC test for leverage, liquidity[more]

    Expect greater SEC scrutiny of hedge funds that share information or collaborate in advance of their trades From Thelawyer.com: A recent Wall Street Journal article — ‘Activist investors often leak their plans to a favoured few’ — focused attention on ‘activist’ investors and stock analy

  3. …And Finally – This week's least competent criminal is Austrian[more]

    From ABCnews.go.com: A German sought by authorities for alleged fraud has been arrested in Austria — after dropping into a police station to ask officers whether he was under investigation. Police in Salzburg said the 59-year-old man walked into a police station in the city on Friday night. Sp

  4. Investing – Hedge funds find pitfalls along with profits in real estate ventures, Marcato Capital Management makes new bet on Dillard’s[more]

    Hedge funds find pitfalls along with profits in real estate ventures From Law360.com: Hedge funds have joined the rush to real estate deals and development in recent months to close the financing gap left by tightening bank standards, but attorneys say many aren't prepared for the disclo

  5. Agecroft Partners estimates 90% of hedge funds using social media[more]

    The use of social media has increased significantly within the hedge fund industry over the past couple of years. Social media is broadly used by investors as part of their due diligence process on hedge funds, by service providers in their sales efforts to hedge funds, and by hedge funds to enhance