More state pensions in Southeast Asia are likely to resume manager search and hiring activities as well as issuing new investment mandates after a period of slowed activity in 2020 due to COVID-19. Pension assets in the region have been growing steadily over the years, accounting for 3.4% of institutional addressable assets in 2020, the highest among all institutional types. Malaysia has the highest percentage of state pension assets outsourced to external managers, at 15%, in 2020.

Even as persistently low interest rates are prompting asset owners to reassess their strategies, target returns between 4% and 5% are seen by the majority, or 61.9% of managers, as realistic for institutions. Managers in the region rank meeting targeted or future returns and managing liquidity and risks as the top-two key topics of discussions when engaging institutional investors. Other key issues for managers engaging with institutional clients include environmental, social, and governance (ESG) and alternative investments.

With their diverse needs and risk appetites, we believe that asset owners in the region will continue issuing new institutional mandates in both the alternative and traditional spaces. Managers with expertise in global, alternative, and ESG-related investments will find opportunity as asset owners diversify across strategies, markets, and countries.

For more on this topic, as well as insights into key market dynamics across retail and institutional investors in this region, leverage our report, Asset Management in Southeast Asia 2021: Sustaining a Winning Streak in a New Era.