Asia-Pacific's pension funds find new ways to spend 'risk budget'

TODAY'S pension funds face severe headwinds. Weak investment returns, a shrinking workforce and longer life expectancy of retirees have left the pensions industry in Asia-Pacific (APAC) facing a growing funding gap.

These challenges are driving pension funds to strike a new balance on risk and return. A new State Street survey of 134 pension funds globally, conducted by the Economist Intelligence Unit, found that 88 per cent of respondents based in APAC expect their institutions' investment risk appetite to increase over the next three years. This compares with 77 per cent of respondents globally.

Pension funds are undertaking a root-and-branch reassessment of their portfolios. They are looking to find the right mix of assets to drive higher returns, while also keeping costs under control and minimising their overall risk exposure. It is a delicate balancing act.