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Asian Pension Funds Beat The Downturn
Asian-Pacific pension savings beat the recession by growing throughout 2008 and total funds under management total more than those in Europe for the first time, according to a study. This is good news for locals saving for their pensions.
The world’s largest 300 pension funds lost $1.5 trillion during 2008 with fund sizes ending as $4.7 trillion in the USA and Canada, $3 trillion in Asia and $2.5 trillion in Europe.
One advantage Asian pension funds have over their global counterparts is they are newer and many of the contributors are younger, meaning more people are paying in than are taking money out, which is a real problem in North America and Europe.
The world’s fastest growing pensions are in Taiwan – with Australia second.
The world's biggest superannuation fund is the Japanese Government Pension Investment Fund.
This fund grew more than $200 billion to $1.28 trillion in 2008. The pension is largely invested in government debt bonds – one of the only growth sectors in many economies during the year.
Most of the few pension funds that got larger last year were Asian, that tend to commit more to fixed-income assets than other funds.
Taiwan's Postal Savings Fund increased from $129 billion to $154 billion that helped the fund rise to eighth in the rankings. Singapore's Central Provident Fund went from $95 billion to $104 billion, climbing six places to 16th.
Malaysia's $99 billion Employees Provident Fund also entered the top 20 at 19.
The Watson Wyatt pension fund ranking shows several Asian savings funds are outpacing others in the world.
Japan is the best performing, with the biggest schemes growing by 21.3% a year between 2003 and 2008. Denmark is second.
"Many government-run pension funds in Asia generally maintain a conservative asset allocation, with substantial exposure to fixed income," says Naomi Denning, Watson Wyatt's head of investment consulting for Asia-Pacific.
"Consequently, these funds were not hit as hard by the global financial crisis as funds in the US and Europe in 2008. However, the challenge facing many pension funds in the region is how to cope with the changing investment environment."
Three Asian sovereign pension funds performed well and hit the top rankings for the first time:
- Singapore's Central Provident Fund (up to 16 from 22)
- Malaysia's Employees Provident Fund (up to 18 from 23)
- Taiwan's Labour Pension Fund (up to 94 from 138)
Other sovereign funds that also moved up rankings include Australia's Future Fund (to 52 from 66), China's National Social Security Fund (to 24 from 38) and Thailand's Government Pension Fund (to 222 from 241).
"The world's largest pension funds were not exempt from the economic crisis and have been set back a number of years," Denning said.
"While, over a five-year period, they still show impressive growth, results in aggregate during the last decade have been more volatile. So despite having fared better than many other funds, they will now be focusing even more on risk management and reassessing their governance arrangements to ensure investment returns are more secure in future."
