06Oct

Inflation concerns drive Asia-Pacific pension funds to alternatives

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Pension funds in Asia-Pacific are planning to increase allocations to alternatives to hedge against inflation, but they lack the expertise and understanding to manage these assets in-house, according to a Cerulli Associates report.

Between 2020 and 2022, these pension funds increased allocations to alternative assets by 28.4%, and are looking to outsource their alternative investments — particularly to hedge funds, private equity and private debt, according to The Cerulli Report — Asian Retirement Markets 2023: Building Security Against Uncertainty. Figures were not available.

The research and consulting firm surveyed 32 pension funds with at least $100 million in assets from China, Australia, Singapore, Hong Kong, Taiwan, South Korea, and Thailand in July.

The growth in allocations was led by South Korean pension funds. For instance, the National Pension Service, Jeonju, increased alternative allocations by 5.5 percentage points and the Korea Teachers’ Pension Fund, Naju-si, increased its exposure by 4.1 percentage points between 2020 and 2022, the report said.

In 2022, alternatives made up 10.1% of total retirement assets in the Asia ex-Japan region, the highest the asset class has been since 2018.

“The weak macroeconomic environment in 2022 shifted some interest towards investments with capabilities to hedge against inflation while providing good returns,” Cerulli Associates analyst Shaun Ng said in an email.

Hedge funds in particular were a popular choice among the pension funds that were surveyed. Around 44% of the respondents said they would increase allocations to hedge funds over the next two years, the survey found.

Read more pionline

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