In Africa, Asia, Latin America and the Middle East, pension funds are increasing their exposure to equities at the expense of fixed income, according to a new report by Mercer.

In aggregate, over the five-year measurement period, average allocations to equities for the growth markets covered by the report rose eight percentage points to 40 per cent, while fixed income allocations decreased 11.3 percentage points to 45.6 per cent. Allocations to alternatives, cash and other asset classes, which accounted for the rest, saw minimal changes.

In Asia, wide differences exist between countries, noted the report. For instance, fixed income allocations in Thailand reached 73 per cent, while Indonesia’s cash allocations were 45 per cent. Hong Kong had the highest equity allocation at 66 per cent, while South Korea had the largest exposure to alternatives, at 11 per cent.

“Like other growth markets, Asia is seeing pension reviews and reforms with both the establishment of new and enhanced pensions systems, and a general shift towards defined contributions, away from defined benefit plans,” said Janet Li, Mercer’s wealth leader for Asia, in a press release. “With more than half of the world’s middle class residing in Asia and evolvements in pension structure and delivery, effective investment solutions are essential to meeting the future needs of Asia’s ageing societies.”

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