Inside the new pension playbook: managing liquidity, collateral and margin in APAC

As far as pension fund portfolios go, APAC is a region in transition. Stemming from meaningful growth in size of assets under management (AUM), some key trends are emerging across these institutions, regardless of their starting point and current allocations.

Similarities can be seen in the increasing sophistication in how they approach portfolio construction, in their higher allocations to global and illiquid assets, and in their deeper focus on liquidity, collateral and operational resilience.

Australia’s superannuation funds are a case in point. After around 30 years of compulsory contributions, strong governance and long investment horizons, there is now a substantial pool of retirement capital, of around A$4.3 trillion¹ (US$2.8 trillion). This is the equivalent to roughly 150% of GDP, and counting².

With this success has come the challenge from outgrowing the domestic market. As a result, an increasing number of investments have headed offshore, with a larger portion now allocated to private markets assets – an average of 20% and, for some, upwards of 30%. At the same time, there are estimates that 2.5 million members plan to retire between now and 2035³.

Australia’s dilemma, therefore, is finding a way to balance the need for a greater focus on the liquidity profile of the super funds as more members enter their drawdown phase and become focused on capital preservation – which, in turn, requires an increasingly large and complex investment product and underlying operational setup to deliver expected outcomes.

Dealing with regional differences

Australia is not alone in being at an inflection point. Yet the investment approach that APAC’s pension funds take varies significantly country to country.

Japan, for example, operates differently. Although it is the second-largest pension market in the region, the sector’s AUM is closer to 80% of GDP. And while domestic institutions have also been expanding into private assets, they continue to maintain comparatively stronger allocations to equities and listed markets.

Maturity levels vary widely in other parts of the region, with operational processes uneven. However, it’s not uncommon for sovereign wealth funds or insurer-affiliated pension plans to rely on spreadsheets for elements of investment collateral or short-term liquidity management.

“Portfolio optimisation doesn’t really form part of the thinking yet,” said Cherry Li, head of Liquidity & Margin Segregation Services for BNY in APAC.

However, as investment objectives and decision-making trends converge, pension funds are not only redefining how they invest; they are also rethinking how they manage the complex operational backbone required to support modern portfolios.

In short, this requires a solution to integrate liquidity, collateral, margin and financing into a single ecosystem, explained Nehal Mehra, head of APAC Securities Financing and Global Collateral, at BNY.

“Pension funds need to ensure they think about how to utilise collateral in a more efficient way,” he added.

Managing liquidity pressures

The shift into alternatives is especially important to how pension funds are evolving across APAC.

As these investors pursue higher returns and diversification, they are tilting further down the liquidity spectrum. This brings with it new challenges, particularly relating to liquidity management, collateral mobility and cash optimisation, explained Li.

The pressure on liquidity is especially acute for systems with flexible redemption profiles – such as in Australia – where members may switch strategies, redeem, retire or respond to market events.

Regulators are also paying close attention, added Mehra. They expect pension funds to demonstrate strong liquidity governance and contingency plans, especially during periods of market stress.

For pension funds in the region, there are four key elements to liquidity management:

1. Improved monitoring of the liability side, including member flows and expected redemption cycles.
2. Tools to monetise or mobilise assets quickly, in case liquidity is needed unexpectedly.
3. Sophisticated collateral management, since many liquidity sources, such as secured funding, require eligible collateral.
4. Integration across investment, treasury and operations teams, which historically operated in silos.

A modern approach to liquidity and collateral management

Because of the growing pressures facing pension funds in APAC, contingent liquidity solutions are becoming more integral, to allow them to access cash even when underlying investments are illiquid or global markets are dislocated, explained Mehra.

To achieve this, tri-party collateral platforms are in greater demand, he added. These platforms play several crucial roles – from enabling pensions to monetise collateral in a controlled way (often through repo or secured funding), to supporting regulatory margin requirements, to offering operational efficiency by automating collateral movements, eligibility checks, reporting and segregation.

“Tri-party collateral platforms provide a scalable infrastructure that connects liquidity, collateral and financing activities,” said Mehra.

This is no longer just a regulatory necessity. Pension funds now see a tri-party approach as an enabler of broader strategic objectives, such as generating contingent liquidity, managing collateral for derivatives, lending securities through agency or direct programmes, and reintegrating cash and collateral management into a single ecosystem.

Securities lending: an emerging liquidity tool

Historically, securities lending within pension portfolios was primarily a way to earn incremental yield, especially from passive equity portfolios. However, in line with the growing liquidity pressures highlights for pension funds in Asia Pacific, securities lending is now increasingly viewed as another way to create liquidity.

This reflects in efforts by pension funds to explore ways to lend securities and receive cash collateral, which can be repurposed for short-term liquidity needs, said Li. In addition, these investors are looking to participate in sponsored repo transactions or cleared lending channels, which offer more stable or scalable liquidity options.

Further, pension funds are considering integrating their securities lending programmes with broader liquidity and collateral management infrastructures.

Inevitably, this evolution requires more robust internal capabilities, a clear policy framework and a willingness to interact with broker-dealer markets in different ways.

However, for sophisticated funds, securities lending is becoming a critical part of liquidity strategy, added Mehra.

Rethinking portfolio management

As pension funds in some of the more advanced markets in APAC push deeper into collateral optimisation and integrated liquidity platforms, other parts of the region still need to play catch-up in terms of operational readiness.

Shortfalls can be seen in various areas, such as some pension funds leaving large amounts of cash uninvested with custodians, explained Li. Others might lack dedicated treasury teams, or continue to persevere with manual processes and spreadsheet-based workflows, she added.

For these and other institutions, the priority is to upgrade cash management processes, gain operational clarity on collateral and improve understanding of secured financing structures. If they do this, they have a better chance of reaping the benefits from leveraging tri-party infrastructure and optimising their collateral.

_{Sources - 
1 - https://www.apra.gov.au/quarterly-superannuation-performance-statistics-highlights-june-2025
2 - https://www.bny.com/corporate/global/en/insights/australia-superannuation-liquidity-resilience.html, and https://www.rba.gov.au/speeches/2025/sp-dg-2025-09-16.html
3 - National Press Council of Australia on 3 September. https://iview.abc.net.au/show/national-press-club-address}

About BNY’s Liquidity & Financing platform
Our platform powers the buy-side by increasing efficiency and providing diverse financing, liquidity and collateral optimization. Whether investing cash, funding trades, or managing margin, our clients access a fully integrated suite of solutions spanning securities lending, repo, deposits, short-term investments, collateral optimization, and margin segregation linked to your custody account. All backed by BNY’s global scale and resilient infrastructure.

Our CollateralONE solution expands our buy-side triparty platform, enabling firms to optimize collateral, improve liquidity and streamline financing activities through a single access point. This ecosystem enhances secure collateral management by centralising control of your assets for the purposes of margin management and financing activities.

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