Asia ex-Japan pension fund assets to reach $4t by 2015
Assets held by pension funds in Asia ex-Japan and Australia stood at $2.2 trillion at the end of last year and are set to reach $4 trillion by 2015, largely fueled by an expanding middle class.
According to a survey by Citi and Cerulli Associates, the development of institutions and onshore mutual funds in China is a key driver. Korea is also increasingly influential, with the country's $285 billion National Pension Fund accumulating $2 billion in assets per month. The fund is leading the way in terms of asset diversification, having set out plans to put as much as $4 billion into alternative assets such as hedge funds, private equity and infrastructure.
The survey comes after a similar study in September by Towers Watson and Pensions & Investment found that Asia Pacific sovereign wealth funds and public sector pension funds now account for $3.2 trillion in assets under management, 25% of the global total.
Five regional players featured among the 10 largest global pension funds in 2010, including Japan's Government Pension Investment Fund and Local Government Officials Fund, Korea's National Pension Fund, Malaysia's Employee Provident Fund and Singapore Central Provident Fund. Each of these is government-sponsored and they represent 60% of the top 10 funds' assets and 18% of total assets.
North America remains the largest holder of pension fund assets, with 39% of the global total, but Asia Pacific has overtaken Europe to claim second place, with 28% to 27%.
While Japan's Government Pension Investment Fund is the largest fund of its kind globally, private equity firms have traditionally struggled to win commitments from the country's pension industry, although they are loyal investors once on board. Hal Morimoto, managing director at Astoria Consulting Group, told AVCJ last month that Japanese pension funds are 10 times more likely to invest in a hedge fund than in private equity, given the liquidity differentiate.
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