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Taiwan’s BLF funds hit by war in Ukraine, inflation, rate hikes

By Hui Ching-hoo   
April 8, 2022

Taiwan pension funds supervised by the Bureau of Labor Funds (BLF) kicked off the year on a sour note as the Russia-Ukraine war, rising oil prices, and interest rate hikes to tame soaring inflation dragged down its investments.

The eight pension and annuity funds swung to an investment loss of NT$164.8 billion (US$5.73 billion) in the first two months of 2022 from a NT$101.4 billion gain in the same period of 2021. Their average loss for the period was 3.07% versus a 2.08% gain last year.

The Labor Retirement Fund, Taiwan’s largest defined-benefit retirement scheme, was the worst performer with a loss of 3.43%, followed by the Labor Insurance Fund with a 3.16% loss.

“The Russia-Ukraine conflict that broke out in February is hiking crude oil and raw material prices as well as worsening global supply chain and inflation risks…” the BLF says in a monthly report on April 2. “The tightening monetary measures taken by major central banks to combat inflation led to a consecutive decline in global stock and bond markets in the first two months.”

The US Federal Reserve, which began signalling last year that rate hikes were coming, acted on March 16, raising its benchmark federal funds rate by 0.25%, the first increase since 2018. The central bank also indicated more rate hikes at all six of its remaining policy meetings of 2022.

The BLF says it will continue to bolster risk management and diversify portfolio allocation in order to mitigate downside risk and enhance its funds’ long-term return.

The eight funds had NT$5.23 trillion of total assets as of February 2022, up from NT$5.11 trillion at the end of 2021.