Taiwan pension ramps up alternatives exposure

Taiwan’s largest pension plans to nearly double its allocation to foreign alternatives to $7.4 bn by the end of 2016 to achieve higher returns and to diversify its portfolio.

The Bureau of Labor Funds (BLF) intends to increase its foreign alternatives allocation to 8 percent, up from its current 4.6 percent allocation by the end of the year, a spokesperson from the pension fund told Private Equity International.

The NT$3 trillion ($92 billion; €81 billion) pension fund said its current foreign alternative investment holdings stand at about $4.2 billion. It plans to raise it to as much as $7.4 billion by the end of the year. The fund does not, however, have a target allocation for private equity.

According to BLF’s administrative plan for 2016, the fund seeks to “adopt diversified investment strategies” in response to a changing global financial landscape, and in turn, “increase alternative investment positions to diversify portfolio risks”.

When asked whether it prefers to do direct investing or work with fund managers, it said it will work with external fund managers for private equity investments. It will be looking for managers with good performance records, risk management capabilities and liquidity management. It will also conduct qualitative and quantitative surveys before making investment decisions, the spokesperson said.

BLF supervises seven public funds in Taiwan including the Labor Pension Fund (New Scheme), Labor Retirement Fund (Old Scheme), Labor Insurance Fund, Employment Insurance Fund, Occupation Incidents Protection Fund, Arrear Wage Payment Fund and the National Pension Insurance Fund. Its funds recorded a combined rate of return of less than one percent as of March 2016.

The pension fund also added it has no plans to extend its investment team due to human resource and budget limitations.

In April, it hired JP Morgan Asset Management, Allianz Global Investors, Deutsche Asset Management and PineBridge Asset Management to manage $800 million each in its Global Multi Asset portfolios. It appointed BlackRock, Northern Trust Asset Management and Vanguard Group to manage $700 million each in Asia-Pacific Equities.