Assets of all Asia-Pacific pension funds were up 20% in 2017 to $5trn, according to the firm’s research, which looked at the top 300 global pension funds.
In total, the assets of all 300 funds totalled $18.1trn, an increase of 15.1% from the previous year.
Asia-Pacific has seven of the world’s top 20 pension funds, with Japan’s Government Investment Fund remaining the largest pension fund globally. In 2017, the combined AUM of the seven was $3.3trn, up 25.6%.
“Strong performance gains especially in this region during 2017 helped boost many Asian pension funds,” Bok said in the statement.
She added that Asian sovereign and pension funds have been diversifying investments over the 12 months “as reflected by new mandates awarded to their asset managers.
“Examples include sustainability-linked or ESG portfolio, global infrastructure, multi-asset, absolute or total return strategy, private market investments, alternative credit and more overseas investing.
“This also puts a spotlight on their governance and how they operate.”
The growth of pension funds in Asia-Pacific presents opportunities for fund managers, especially since pension funds will continue to seek outside expertise in managing the non-domestic parts of their portfolios, Bok told FSA.
The usual progression for pension funds is they start managing all assets in-house, and then outsource some of them for a while and then insource them again, she said.
“Inevitably, they will come back to outsourcing, especially if they don’t have professional people that specialise in investing outside the home country,” she said.
Managers can get an indication of how much is outsourced based on the percentage of pension fund assets invested abroad.
“A good place to start is what percentage of the portfolio is domestic and what percentage of the portfolio is overseas. If I was looking at a portfolio that has 80% in domestic bonds and equities and 20% overseas, it is probably not too far to say that the 20% is outsourced.”
Typically, for the largest pension funds, around 25%-30% of their assets are outsourced, she added.
The world’s top 20 pension funds (US$m)
Source: Willis Towers Watson