Demographic pressure to boost retirement assets

Intensifying demographic pressure will force Asia, excluding Japan, to boost retirement assets over the next few decades, creating significant opportunities for global fund managers, according to Cerulli's latest report.

The report, titled Asia Pensions: An Emerging Opportunity, says much of Asia is set to age dramatically in the years ahead, requiring governments in the region to take steps to increase the level – and performance – of retirement funds, including increased overseas investing with the help of international asset managers.

"Asia ex-Japan's investable pension assets will grow by 55 per cent between 2009 and 2013 to more than $1.1 trillion [Dh4.04trn], while addressable assets – which managers can potentially access – will jump even faster, by 75 per cent, to more than $370 billion," said Ken Yap, Asia-Pacific director at financial servicing consultancy Cerulli Associates.

The report explains that the bulk of the opportunity lies in North Asia, which contains almost 90 per cent of addressable assets, dwarfing the medium term potential in Southeast Asia. While the long-term potential is good, volumes and profits from managing money in Asia ex-Japan's pension sector are currently low – especially compared with the region's retail sector – and will take time to improve.

"Asset management firms that shoulder low profitability now in order to build their links in the sector will probably be in a good position to make the most of the pension opportunity as it matures," said Sunil Jagtiani, Associate Director at Cerulli Associates. "It's a question of building relationships and market positioning; but whether a firm should delve into the sector in the first place depends on the scale of its business operations."

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