What happens as global economic leadership changes hands from the Western economy to the growth markets — countries in Asia, Latin America, Middle East and Africa? In our very first Growth Markets Asset Allocation Trends: Evolving Landscape, we analyze pension fund asset allocation in these dynamic markets and interpret what the trends mean for asset owners, asset managers and, ultimately, individual investors.
Consider these numbers:
- 25 of the top 50 global institutional investors are located in growth markets.
- Almost 70% of global growth now comes from these economies. 
- In 2018, for the first time, more than 50% of the world’s population — 3.8 billion people — is considered middle class or rich; this segment is expected to grow to 5.3 billion people by 2030.
- Fifty-four percent of the world’s middle class resides in Asia.
Growth market economies are quickly becoming leaders of global growth. Their share of global equity market capitalization has tripled over the last 15 years to 30%, while their share of global market debt has doubled to around 20%. This trend will only increase as global financial markets catch up with their massive economic growth.
To help investors understand the current state of assets under management in these markets, Mercer conducted its first asset allocation survey in growth markets. Focusing on corporate, government and mandatory pension schemes, we gathered information on nearly US$5 trillion in assets under management across Latin America, Africa and Asia; also included is commentary on Middle Eastern investment trends.
Among the key findings:
- Exposure to equities has been increasing at the expense of fixed income.
- Market liberalization is enabling more diversified portfolios: foreign assets are rising at the expense of domestic assets. Portfolios retain significant home-country biases, though we expect trends of liberalization to continue.
- Alternatives gained greater traction in investors’ portfolios, primarily in property, infrastructure and private equity.
“In general, we are seeing trends toward more open markets, which enable investors to better diversify their portfolios across geography, sectors, asset classes and currencies.”
Fiona Dunsire, Mercer’s Wealth Leader for Growth Markets
While there is great country-by-country variation in broad asset allocation, driven primarily by local regulations, we expect this to change as more countries further open their doors to international investing. Investors across the globe are responding.
Institutional investors and asset managers within growth markets and around the world can benefit from insights into the state of these increasingly important economies. Download the free report to see the complete findings, including region-by-region analysis for Latin America, Asia, the Middle East and Africa.
Investment & Pensions EuropeTop 1000 Global Institutional Investors, 2016
Data from the World Bank.
Kharas H and Hamel K. “A Global Tipping Point: Half the World Is Now Middle Class or Wealthier,” September 27, 2018, available at https://www.brookings.edu/blog/future-development/2018/09/27/a-global-tipping-point-half-the-world-is-now-middle-class-or-wealthier/
Brookings. The Unprecedented Expansion of the Middle Class: An Update, 2017.
Data as of the most recent date available for each country; please consult the full report for details
References to Mercer shall be construed to include Mercer LLC and/or its associated companies.
For Mercer’s conflict of interest disclosures, contact your Mercer representative or see www.mercer.com/conflictsofinterest.
This does not constitute an offer to purchase or sell any securities.
Mercer does not provide tax or legal advice. You should contact your tax advisor, accountant and/or attorney before making any decisions with tax or legal implications.
Information contained herein may have been obtained from a range of third party sources. While the information is believed to be reliable, Mercer has not sought to verify it independently. As such, Mercer makes no representations or warranties as to the accuracy of the information presented and takes no responsibility or liability (including for indirect, consequential, or incidental damages) for any error, omission or inaccuracy in the data supplied by any third party.
Investment management and advisory services for U.S. clients are provided by Mercer Investments LLC (Mercer Investments). Mercer Investments is a federally registered investment adviser under the Investment Advisers Act of 1940, as amended. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. Mercer Investments’ Form ADV Part 2A & 2B can be obtained by written request directed to: Compliance Department, Mercer Investments, 99 High St, Boston, MA 02110.