The seventh annual Institutional Excellence Awards encompassed one of the most challenging periods for investment in living memory.
Standout asset owners during this period have had to be nimble and responsive as conditions sharply deteriorated in late February and March, only to offer investment opportunities in fits and starts from April even as the global economic environment continued to struggle and a US presidential election reached its crescendo.
When choosing the winners of these awards, AsianInvestor and our select panel of expert industry judges took into account the ability of the region's institutional investors to adapt themselves to these unique challenges, in addition to their ability to maintain superior levels of strategic investment planning, maintaining and improving internal resources and personnel and preparing for the obstacles of the future. The winners were the institutions that could best demonstrate how they met these needs.
We turn to our institutional category awards, and in particular our newly divided pension fund category. We split the award into two to recognise both small and medium pension funds and also the region's biggest pensions*. Both awards went to Korean institutional investors, with Public Officials Benefit Association securing a second award in addition to being the top asset owner for Korea, while National Pension Service took the gong for our top large pension fund.
PENSION FUND - SMALL (less than $50b AUM)
Public Officials Benefit Association (Korea)
Poba is not just a forward-looking pension fund, it impresses because it does so while being relatively small.
The Korean fund is enjoying a steady surge in assets – it now has around $12 billion, versus only $10 billion two years ago – but rather than simply pad existing mandates or place them into passive equity portfolios, Poba’s chief investment officer Jang Dong-hun has instructed his team to try and find new mandates to invest into.
He has also remained a believer in the merits of including a healthy allocation to fixed income, at a time when many pension funds have begun to believe the only way to make their returns is to shift funds increasingly into equities.
Poba has instead gradually rebuilt a fixed income position, to offset the increased risk of its large alternatives asset base and ensure it still has liquidity when required.
Next up? The fund is eyeing US infrastructure assets, following the inauguration of US president Joe Biden, spying a chance to benefit from potential increases of funding into that sector. Jang recently told AsianInvestor he wants to raise infrastructure assets from around 9% of its AUM to 11% in 2021.
And, given its willingness to explore partnerships or joint ventures with other asset owners don’t be surprised if it does so in this space too.
PENSION FUND LARGE (over $50b AUM)
National Pension Service (Korea)
The world’s third-largest pension fund, with W790 trillion ($723.52 billion) in assets, has not always gained headlines for the right reasons. But under the oversight of CIO Ahn Hyo-joon, who had his tenure renewed in October, it appears to have returned to the right track.
Ahn has overseen NPS make a decisive turn to become a proponent of sustainable investing and acting as a responsible steward of equities, rather than a voiceless party. The pension fund has become willing to vote against measures of Korean companies at times, something that the clubby atmosphere of its cross-shareholding conglomerates has historically not seen a lot of. For international investors often exasperated by the willingness of Korean listed companies to ignore minority shareholder rights and sometimes support cousin companies, this has been an extremely positive shift.
As part of this, NPS has also become a more assertive investor into ESG. In November 2019 its fund management committee approved an action plan to enhance responsible investing beyond domestic equities and into global stocks and local and global fixed income too, as well as demanding more ESG requirements of external managers. The asset owner was already using screening and integration strategies to invest into local equities.
It is also actively seeking to diversify its portfolio further and has set some bold targets to get there. NPS’s fund management committee approved it to raise its allocation to equities from 41.9% in August 2020 to 50% by 2025 and increase alternative assets from 11.6% to 15%. It also aims to raise its exposure to foreign investments from 37.3% to 55% in the next five years.
To help achieve this, and manage its growing asset pile, NPS has been staffing up. It increased its number of investment personnel from 212 in 2014 to close to 380 in 2019, which helped reduce per-capita AUM from W2.2 trillion in 2014 to W1.9 trillion at the end of 2019. In addition, an NPS spokeswoman offered AsianInvestor more details on this on Thursday
(January 20), discussing its plans to add 38 executives in part to help executive its overseas investing ambitions.
* AsianInvestor divided its pension fund award into small/medium and large categories in 2020, to recognise the diversity of asset owner operators across the Asia Pacific.