Asia Pacific pension fund assets hit $3.7t

There are 31 Asian representatives in Willis Towers Watson’s ranking of the world’s 300 largest pension funds as of year-end 2016. The growth in aggregate asset size follows a 3.4% decline in 2015. The top 300 had $15.7 trillion under management, accounting for 43.2% of pension fund assets globally.

Japan’s Government Pension Investment Fund (GPIF) remains the world’s largest pension fund with $1.2 trillion in assets. Other Asian entrants in the top 20 include: Korea’s National Pension Service (NPS, $462.1 billion), China’s National Council For Social Security Fund (NSSF, $348.7 billion), Singapore’s Central Provident Fund ($227.1 billion), Japan’s Pension Fund Association (PFA, $183.2 billion), and Malaysia’s Employees Provident Fund (EPF, $165.5 billion).

The top 20 account for $6.3 trillion in assets, up from $5.1 trillion in 2015. The Asia Pacific-domiciled funds have by far the smallest allocation to alternatives and cash – with 6.6%, compared to 34.7% for North America and 14.4% for Europe and the rest of the world. They are also the only geographical group to have bond exposure of more than 50%, while their equities allocation, at 39.2%, is the lowest.

This can be explained by the size of GPIF relative to its regional counterparts. Despite a concerted effort at asset diversification, the bulk of the fund’s investments are still in bonds and its first call for applications from alternatives managers – with a view to backing fund-of-funds across private equity, infrastructure, and real estate – only came earlier this year.

Jayne Bok, head of investments for Asia at Willis Towers Watson, warned that performance driven by public equities markets was unlikely to be sustainable. Investors should think more carefully about portfolio composition in terms of risk, diversification and investment duration.

“In a highly competitive and fast-changing world, Asian funds with a long horizon should evaluate their equity portfolio characteristics to increase the chance of outperformance on a sustainable basis to meet their return objectives,” she said. Key factors include the extent of home bias, the degree to which portfolios resemble market indexes, investment constraints, manager structure, and cost and implementation routes.

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• Topics
• LPs
• Performance
• Asia
• Government Pension Investment Fund (Japan)
• Pension Fund Association
• NSSF
• EPF
• National Pension Service (Korea)