Taiwan’s seven pension funds supervised by the Bureau of Labor Funds (BLF) incurred an investment loss of NT$80.5 billion (US$2.81 billion) in September as global markets turned sour, almost wiping out the accumulated gain from the previous eight months.
It was the third largest monthly loss of the year after the funds lost hundreds of millions in both January and March as markets sold off in the wake of the coronavirus pandemic.
The BLF funds have now reported losses in four out of nine months this year.
“With factors including the resurgence of Covid-19 cases across Europe, the US-China trade tension, as well as market uncertainties relating to the US presidential election and US stimulus packages, global stock markets became highly volatile in September,” the BLF says in a monthly report on November 2.
September’s market reversal sharply narrowed the BLF funds’ accumulated investment income over the nine-month period to NT$7.63 billion, from NT$88.12 billion between January and August.
The funds started reporting gains in July as markets began to recover along with improving economic activities after global central banks embarked on monetary easing policies, including rate cuts and bond buying. Some central banks, including Taiwan’s, have slashed their benchmark rates to all-time lows.
The Labor Pension Fund, Taiwan’s largest public retirement plan, was the worst performer of the seven funds, with an accumulated investment loss of NT$9.69 billion through September.
The second worst was the Labor Retirement Fund, the island’s largest defined-benefit retirement plan, with a loss of NT$640 million.
The BLF will probably take a more defensive approach to asset allocation in light of the unstable global economic outlook, according to an investment consultant based in Hong Kong.
“The BLF is believed to be more prudent in granting funding to its external asset managers, especially for new strategies such as the global multi-asset and global infrastructure securities mandates,” he tells Asia Asset Management, speaking on condition anonymity.
“It may also put more focus on domestic investments to capture the growth opportunities from local sectors, like semiconductor,” he says.
The BLF had NT$4.84 trillion of total assets as of September 2020.