Taiwan’s Bureau of Labor Funds (BLF) has adopted a disciplined asset allocation framework amid heightened volatility in global financial markets, seeking to balance risk and return and taking into account the characteristics, cash flows, asset scale and regulatory constraints of the funds that it manages.
Based on this framework, and in line with prevailing sustainability trends, the BLF implements a diversified foreign investment strategy, strengthening fixed income allocations while building core equity positions through both active and passive strategies, according to Keng-Wei Hsu, deputy director general of the pension fund supervisor.
The BLF, which oversees eight pension and annuity funds with NT$8.52 trillion (US270.4 billion) of total assets as of end-2025, plans to allocate up to $2 billion in a foreign investment mandate this year.
“The exact amount and investment strategies of the new mandates are yet to be finalised, but sustainability investments are expected to remain a key theme,” Hsu says in an interview with Asia Asset Management.
He says the BLF plans foreign mandates annually in line with its funds’ cash flow needs, asset allocation and market conditions.
“While the specific investment theme has not been determined, we strongly welcome participation from qualified managers. The greater their involvement, the better our prospects for achieving long-term stable returns,” he adds.
He says the BLF funds’ foreign investments comprise fixed income that can generate stable income, as well as active and passive strategies focused on fast-growing sectors.
Local equities
Last year, the BLF funds earned a record NT$1.2 trillion of income from investments, with approximately half coming from local equities.
Although Taiwan’s stock market is experiencing a bull run fuelled by the semiconductor industry and artificial intelligence boom, Hsu says the BLF remains committed to its diversified allocation principles.
“Our approach is to maintain a balanced allocation across equities, fixed income and alternative assets, while allocating capital to markets where return prospects are relatively more attractive,” he explains.
“Amid geopolitical risks, monetary policy uncertainties and potential currency volatility, we will continue to allocate across both domestic and overseas markets to balance risk and return and to pursue long-term, stable performance.”
The funds are looking to tap into opportunities created by artificial intelligence. According to Hsu, the BLF “will closely monitor how to capitalise on opportunities driven by the expanding application of AI which is expected to enhance efficiency and productivity across various industries”.
Alternatives
He also highlights the importance of alternatives in diversifying investment risk amid heightened market volatility in recent years.
The BLF incorporates alternatives, including global listed real estate equities and infrastructure securities, through dedicated foreign mandates, alongside global multi-asset strategies as part of its broader diversification framework. It also maintains exposure to commodities within its overall portfolio.
These investments are aimed at enhancing portfolio resilience, generating stable cash flows and capturing long-term opportunities arising from structural trends such as the energy transition, digitalisation and social resilience.
Hsu says portfolio diversification and market volatility are among the factors the BLF considers when assessing alternative allocations and potential standalone strategies.
He says although digital assets have attracted growing market attention in recent years, the BLF is monitoring developments closely given ongoing market volatility.
He emphasises the BLF’s commitment to sustainable investing.
Last year, the pension supervisor outsourced a $1.6 billion global climate action passive equity mandate to four foreign asset managers, and joined two international environmental, social and governance organisations – the Asian Corporate Governance Association and the Asia Investor Group on Climate Change.
According to Hsu, the BLF is “committed to ESG and incorporates the principles of sustainable investing into our decision-making process, even as the global financial markets become increasingly volatile”.
