Asia pension funds, SWFs pick up pace on external mandates

There are increased requests for proposals in most Asia-Pacific markets in the first half of 2023 compared to the second half of last year, according to a recent report by Cerulli.
Asia pension funds, SWFs pick up pace on external mandates

The region’s large public institutions are increasingly handing out external mandates as they try to deploy excess cash amid a slightly improved market environment.

“We are already seeing many new mandates being released in global equities and alternatives,” said Soo Ah Ran Cho, associate director at research firm Cerulli Associates.

“Investors are looking for entry points so the mandate environment should deepen in the second half of 2023 as there is too much cash waiting for opportunities.

"Abnormally high tilts towards cash or cash equivalents are not the best options if you have fiduciary duties to fulfil and are assessed externally or at the government level,” Cho told AsianInvestor.

After cash hoarding among institutions and allocations skewing towards fixed income in the past 18 months, new investments are slowly returning.


There are increased requests for proposals in most Asia-Pacific markets in the first half of 2023 compared to the second half of last year, a recently released report from Cerulli on alternatives demand in Asia Pacific also noted.

The research firm is seeing more searches for non-local assets in both alternatives and traditional assets. 

“While it is still a difficult environment for new alternative allocations, demand from large public institutions continues regardless of market swings, with their five- and 10-year investment targets firmly in place,” the report said.

Private credit has become increasingly popular with asset owners in Asia Pacific over the past 12 months, while sentiment towards private equity remains mixed, with faith in the asset class’s long-term potential but concerns about current valuations.

Soo Ah Ran Cho

Demand for real estate has also reduced, AsianInvestor has reported recently.


AsianInvestor has also reported on some of these mandates: Taiwan’s Bureau of Labor Funds is seeking bids for its global passive equity mandate – its first request for proposal this year – as it bets on the recovery of equity markets. It plans to allocate up to $2 billion to four selected managers for a five-year term.

Australia’s $77 billion UniSuper, a superannuation fund for the higher education and research sector, also handed a private debt mandate to Revolution Asset Management.

Unisuper also recently appointed NorthStar Impact as a specialist external listed equities manager.

Singapore-headquartered Income Insurance, previously NTUC Income, meanwhile, handed over management of its existing $3billion real estate portfolio to CBRE Investment Management under an investment management agreement.

Income Insurance’s portfolio includes direct and indirect holdings across the Asia Pacific, North America and Europe, Middle East and Africa.


Korean institutions have also been at the forefront of issuing requests for proposals for managing alternative asset and equity mandates since the start of the year.

In the past three months alone, Teachers’ Pension Korea has said it is seeking domestic private equity fund managers, while Korea Post issued two requests for proposals for an overseas infrastructure mandate,  and another one for a domestic equity mandate for its insurance unit.

Public Officials Benefit Association also invited bids from private equity managers for an India-focused mandate.

Meanwhile, Goverment Employees Pension Service handed out a global private equity mandate to three managers.

“Singapore has been another market with healthy appetite, said Cerulli’s Cho. “For instance, Singapore’s GIC has been very active in alternatives and endowments in Singapore also have high appetite risk.”

GIC is a leader in private markets. It has eight separate investment teams below the asset allocation level, half of them in private markets, with a team each for private equity, infrastructure, real estate and external fund managers, the Cerulli report said.

Singapore state-owned investor Temasek has also been growing its private market assets, which accounted for 53% of its portfolio at the end of March 2023.

Over the past decade, its unlisted portfolio generated returns of over 10% annually, delivering higher returns than that of its listed portfolio.

While GIC and Temasek have strong in-house capabilities to invest in unlisted assets, investment managers that can find niche alpha ideas still stand a reasonable chance of obtaining new mandates from these entities, the Cerulli report said.

Asset owners across the region have been issuing mandates. 
Image credit: Shutterstock


Private assets, nevertheless, were in a slowdown in the first half of 2023 in terms of fundraising, investment activity and valuations.

This slowdown could deepen during the second half of the year in the case of recession, which remains a risk, Nils Rode, chief investment officer for private assets at Schroders said in a July note.

In the first quarter of 2023, infrastructure fund-raising experienced a significant correction of almost 90% from the previous year, according to Preqin.

However, other asset classes - such as private debt - only declined by 10% over the same period. Private equity buyout fundraising remained unchanged, indicating more stability

“While a general slowdown and the risk of a recession may be concerning, over time they can also create opportunities for new private asset investments. Historically, attractive vintage years have emerged during times of recessions,” said Rode.


The high volatility and steep public market drops of 2022 had also pushed several asset owners to become more inward-looking, but that trend could reverse.

“Pressure to invest locally, due to forex and volatilities in overseas markets, have caused higher tilts towards local investments in the last 18 months in most of the Asia-Pacific region,” said Cho.

Depending on forex movements and interest rates in the second half of 2023, institutional investors may look for more opportunities in the overseas market, she said.

In some instances, the government pushed public entities such as pension funds to invest more locally, where investment and foreign exchange risks can be better controlled.

Case in point: Malaysia’s Employees Provident Fund was asked by the Anwar Ibrahim government earlier this year to increase local investments to 70% of its portfolio. Currently, overseas investments account for about 37% of total portfolio.

One expert told AsianInvestor that such government directives to invest locally could negatively impact the $217 billion pension fund’s returns and that investment decisions should be left to EPF.

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