At a time when Asia Pacific’s pension funds need to modernise, expand and improve, having high calibre professionals in key roles will be vitally important.
For that reason, AsianInvestor has consulted leading pension fund experts, consultants, custodians and fund managers to put together a list of 20 pension executives who stand out in their field. The list which is being rolled out online over the next two weeks, is not ranked. Nor is it intended to be exhaustive. But hopefully it highlights why these particular executives in the region have so impressed their peers, business partners and colleagues.
HEMANT G. CONTRACTOR
Chairman, Provident Fund Regulatory and Development Authority, India
Indian industry experts AsianInvestor spoke to said that if there is one individual responsible for driving pension reforms in India, it’s Hemant Contractor, the chairman of the Pension Fund Regulatory and Development Authority (PFRDA).
Contractor has been actively driving change through the country’s National Pension System (NPS), which is administered and regulated by the PFRDA. Experts said the voluntary contribution and market returns-linked scheme is increasingly attracting younger Indians, because it allows for relatively higher risk asset allocation.
NPS allows subscribers to choose their own allocation across three asset classes—equity, government bonds and corporate debt. For private sector subscribers choosing the equity option, the fund allocation can rise up to 75%, while government employees can invest up to 15% in equity funds.
Under Contractor’s leadership, the PFRDA has been urging the government to raise the equity cap to 50% for government employees to boost returns as debt returns continue to slide. He also championed lowering the entry barriers for subscribers, reducing the entry amount from Rs6,000 to Rs1,000.
He has also been instrumental in driving a digital push, boosting online channels to attract subscribers. The fund has a 5% cap on alternative investments and Contractor is keen to invest in this space but has said there is a lack of appropriate investment opportunities.
One interesting idea the NPS is toying with is to allow minors (below 18 years) to directly open NPS accounts in their names, in a bid to encourage them to save early. It’s an idea that is bogged down by legal issues but it highlights Contractor’s desire to promote retirement savings in India. However, the NPS’ popularity continues to lag because it offers lower tax benefits compared to other pensions schemes such as the Employee Provident Fund—an “anomaly” that Contractor has been trying hard to remove by consistently petitioning India’s government.
Given NPS’s push to encourage retirement savings, Contractor expects its subscriber base to grow 28% over the financial year starting April 2018, and assets under management to rise nearly 50% from today’s Rs2.25 trillion ($35 billion).
Chief investment officer, Public Officials Benefit Association, South Korea
Sometimes small is beautiful. The Public Officials Benefit Association (Poba), with just W11 trillion ($10 billion) of assets, is a far more diminutive player than some of its Korean pension peers but it’s also very dynamic, thanks in large part to its CIO, Jang Dong-hun.
Since joining in November 2015, Jang has overseen a major shift in the pension fund’s asset portfolio.
Unsurprisingly, Jang told AsianInvestor that his biggest challenge was (and to some degree remains) shifting the portfolio from its high focus on beta stock portfolio to a more diversified set of investments that offered reliable income.
“I’m still in the process of changing the portfolio; I don’t think I’ve done it yet but it’s progress,” he said.
Certainly, Poba’s portfolio is much more diverse now, possessing a sizeable fixed income allocation alongside its hefty 49% weighting in alternative assets.
Jang can take a lot of credit for this dynamic mix, and his assertiveness has helped cause other funds to also weigh up in alternatives. Yet it’s not all about adding more risk; Jang says that the fund looks to mezzanine and real estate debt when weighing up in property for example, whereas once the fund might have jumped into riskier equity tranches.
Of course, he and his directors have sometimes had to endure criticism, whenever equity markets are soaring and others claim the fund should bulk up.
“However, nowadays they are very satisfied with the portfolio changes,” he added, noting that 2017 returns should be well over 10%, a level far above Poba’s annual 5% to 6% investment return target.
“Just from investment returns we generated $1 billion [in 2017],” said Jang.
Jang credits his openness to new investing ideas to a varied career, that has seen him work at six different organisations, including acting as CIO for Woori Asset Management, where he oversaw $20 billion, and before that working as CEO of AllianceBernstein Asset Management in Korea.
As for his motivation, Jang credits getting his job right.
“I work for 127,000 public officials and including their families that’s more like 1 million people whose retirement welfare is on my head; it’s a big responsibility and gives me motivation to work hard and keep moving.”