Relying on high-growth markets is not showing the results it once did – and the current situation is posing more questions than answers, says one corporate pension fund manager.
Corporate pension funds in Japan are struggling to identify the best allocation strategies as the knock-on from distruptive events globally is being felt in Asia’s emerging markets, according to leading pension funds.

With China’s economy challenged by lockdowns and general repercussions from the Covid-19 pandemic, as well as regulatory interventions that have shaken financial markets, Asia’s other emerging economies are now also feeling the burn.

Despite this, many of Japan’s corporate pension funds say they intend to stay the course with emerging market equities, hoping for higher growth over the long-term, says Konosuke Kita, director of consulting at Russell Investments in Japan.

“It looks risky, but on the other hand, the Chinese economy is supposed to continue to grow over time. The judgement on whether the pension funds should continue to invest in emerging [equity] is not easy. Some investors may quit, and others may continue for diversification from advanced economy,” Kita told AsianInvestor.

He said that more than 75% of emerging equity investment is in Asian countries, and many of these are likely to be affected by China. The extent to which China’s rebounds will have a huge influence on the value of the emerging market strategy of Japan’s corporate pension funds.

As Kita pointed out, equity returns of emerging economes were currently lower than advanced economy during the 2010s.

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