>Gauging institutional investor attitudes to Asia

As the world emerges from the worst financial crisis for more than a generation, a shift in economic power from West to East is gathering pace. With many developed countries weighed down with debt and facing years of sluggish growth, corporations and portfolio investors are looking to the dynamic markets of emerging Asia as one of the most promising sources of long-term growth.

This focus on the fastest-growing markets of Asia is mirrored by the rapid development of financial centres in the region, such as Mumbai, Shanghai and Singapore. Global financial institutions continue to increase their presence in these centres to take advantage of strong economic fundamentals, a growing customer base, favourable demographics and deepening financial markets. Overseas investors are also expanding their allocation to Asian asset classes in the hope of better returns and improved diversification, particularly in the context of weak growth in their domestic markets.

The aim of this report, which is written by the Economist Intelligence Unit and sponsored by Fidelity International, is to assess the appetite among international investment managers to deepen their exposure to the Asia-Pacific region. The findings are based on a survey conducted in February 2010 of 109 financial services professionals from across the industry, all of whom have knowledge of their institution’s overall investment strategy and exposure to assets in Asia. Investment banks formed the largest group, with 44% of respondents, while insurance companies accounted for 14%, mutual funds for 13%, and pension and retirement funds for 12%. Just over half of the respondents were based in Western Europe, and just under half were based in the Asia-Pacific region. (Respondents from North America were excluded, although respondents from institutions headquartered in this region accounted for 14% of the total.) Around 50% of respondents represented institutions with global assets in excess of US$50bn. Our thanks are due to all the respondents who took part in the survey.*

KEY FINDINGS

■ Allocations to Asia are set to increase, with major emerging markets grabbing the lion’s share

■ Asian and longer-term investors haven’t forgotten more mature markets

■ Equities are the most attractive Asian asset class

■ Investing in Asia is seen as risky, but balanced by potential rewards

■ Uncertainty about institutional expertise in Asia does not necessarily equal caution

■ Concerns linger about transparency and the quality of regulation in Asia.

To read the full report: INSTITUTIONAL INVESTOR