US asset manager Principal Global Investors (Principal) sees business opportunities in Taiwan’s pension system, where the scope of investment allocations is limited.

“Taiwan has pretty good pension coverage, but it needs to think about how to optimise its investment mix,” Jim McCaughan, chief executive officer of Principal, tells Asia Asset Management in an interview. “This provides some opportunities to us as we can provide international solutions that the pension system needs.”

He notes that the Bureau of Labor Funds (BLF) and Public Service Pension Fund (PSPF) are the largest institutional pension funds in Taiwan, with AUM of US$88 billion and $20 billion, respectively.

BLF, the administrative body of Taiwanese worker pensions, has $26 billion of funds invested globally through external managers. PSPF, the island state’s second largest retirement scheme, has handed $4 billion of global mandates to external managers.

“BLF has been very active in external outsourcing, including smart beta strategies, ESG (environmental, social and governance), equities, absolute return FI (fixed income), multi-assets, and global REITs (real estate investment trusts),” says Mr. McCaughan. “PSPF mirrors BLF, but is generally less sophisticated and has often surprised the market with its tendering and selection process.”

Principal has been operating in Taiwan for about five years and its business has been running quite well, he says. “We have a strong and long-standing relationship with both institutional and insurance clients in Taiwan, and have been successful in securing mandates and top-ups with the largest Taiwan institutions, mainly in the global REITs space.”

Principal recently ventured into sub-advisory opportunities as a more viable way to tap the market rather than setting up a fund company and offering its own funds in Taiwan. Mr. McCaughan says this is because there are already good providers in a market that is competitive, and has the scale and sophistication of most equivalent markets.

Full Content: Asia Asset Management

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