Institutional investors expect to increase their investment in China followed by South Korea and Taiwan, according to a study by Fidelity International.

The study of 100 institutional investors from Europe and Asia, including Australia, found that investment in Asia would rise significantly. 

China and India are predicted to take the largest share of this investment increase.

"Institutional investors increasingly view Asia as an attractive investment destination and a strategic asset holding," Fidelity International head of institutional business Carlo Venes said.

"Most of those institutions surveyed believe that returns are greater across all asset classes in Asia when compared to the equivalent investments in western markets.

"This is a fundamental change in thinking for major pension funds and institutions in both Europe and Asia."

About 57 per cent of institutional investors in Europe and 56 per cent of investors in Asia have plans to increase their asset allocation to China.

South Korea and Taiwan were the most popular investment destinations in Asia's developed markets, according to the survey.

Almost 30 per cent of respondents anticipated their institution to lift asset allocation to South Korea in the next year and 23 per cent anticipated an increase to Taiwan, Venes said.

"Institutions believe these markets continue to show strong economic potential, can deliver solid stock-picking opportunities and have a long-term growth story at a time when the West is struggling to recover from the financial crisis," he said.