Hong Kong: Pension funds in growing economies in Asia, Latin America and the Middle East have a sharply higher percentage of assets parked in stocks, just at a time when trade tensions threaten to derail markets.
Retirement money managers in 14 geographies now allocate 40% of their assets to equities, an eight percentage-point climb over the past five years, according to a Mercer LLC survey released Tuesday that canvassed government, corporate and mandatory pension funds with almost US$5 trillion in assets under management. That compares with about 25% for pension funds in Europe.
The escalating trade spat between the United States and China has heightened fears that stocks are ripe for a downturn.
With tensions mounting and outcomes driven more by politics than economics, the S&P 500 Index will be on course for a “full-scale bear market” without Federal Reserve interest-rate cuts, Citigroup Inc’s global macro strategy team said earlier this week.
The increased allocation to equities by growth-market pension funds has come at the expense of fixed-income investments, which declined 11 percentage points over the five years, according to the survey.
Hong Kong funds have the highest exposure to equities at 66%, although that’s been relatively stable over the period. — Bloomberg