South Korea’s pension funds are the most active investors in alternative investment assets among public pensions in Asia and some other regions, according to the latest Mercer annual report.
Mercer’s latest annual review of asset allocation trends among Asia Pacific-based pension funds showed foreign equities and alternatives continuing to gain ground in portfolios amid an increasingly difficult hunt for yield in the region.
The consulting giant’s Pension Asset Allocation Insights report for 2020, released on June 4, showed alternative strategies accounting for 7.6% of the $1.5 trillion in combined pension assets for Hong Kong, India, Indonesia, South Korea, Malaysia, Taiwan and Thailand, edging up from 7.2% the year before.
Mercer’s survey results showed South Korea pension funds with the highest alternatives weighting at 12.1%, up from 11.3% the year before, followed by Taiwan at 9.6%, up from 8.6%.
The figure is considerably higher than the 4.5% average weighting of the pension funds, which was subject to Mercer’s latest review.
“Korea took the largest portion of alternative investment to diversify its returns and assets,” Mercer said in the report. “Most of them were in the form of fund of funds investment or private equity funds that invest in real estate.”
“As the pension funds seek to diversify its assets, alternative investment assets have also grown in proportion,” said Janet Li, Mercer’s Hong Kong-based wealth business leader for Asia. “The alternative investment exposure has been significant in Korea and Taiwan.”
Meanwhile, in South Korea, the National Pension Service, Teachers’ Pension, Government Employee Pension System, Military Mutual Aid Association and other retirement pensions were subject to the review. (Reporting by Kyoungho Lee)