The report says the asset growth, to more than $620 billion, is due in part to performance gains in foreign stock markets and currency appreciation. Asian equities showed the most asset growth, nearly 45%, according to the research. European and Australian holdings grew almost 30% and Japanese holdings almost 20%.
US institutions also increased their allocation of international holdings from 11% to 13% last year, contributing to the growth. “US pension funds are under significant pressure to generate alpha, and there is a widespread perception among institutional investors that overseas stocks are undervalued,” said John Webster, a Greenwich Associates consultant, in a news release. He noted that the company’s research revealed these institutions expected better rates of return from international holdings than from US stocks.
Other interesting findings announced in the Greenwich Associates report include the lack of growth in commissions relative to the growth in assets under management and the increasing shift by institutions from broker trading to self-directed electronic trading systems and portfolio trading.
Also among the study’s findings was that US institutions that trade international equities are spending more of their brokerage commission payments on obtaining best execution and less on sell-side research. Institutional investors are increasing the amount of commission dollars spent on non-traditional research services like the facilitation of face-to-face meetings with corporate management, Greenwich Associates said.