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Taiwan’s BLF funds suffer fallout of supply chain snarls, global rate hikes

BLF
By Hui Ching-hoo   
July 5, 2022

Taiwan pension and annuity funds supervised by the Bureau of Labor Funds (BLF) reported wider investment losses as the war in Ukraine and China’s strict pandemic policy continued to hamper global supply chains, and central banks hiked interest rates to rein in inflation, dimming growth expectations.

The eight funds posted a total investment loss of NT$251.5 billion (US$8.42 billion) in January through May, increasing from NT$215 billion through the first four months of the year. Their average investment loss in the five months was 4.53% versus 3.92% through April.

The performance marks a turnaround from 2021 when the funds reported an investment gain of NT$277.2 billion in the first five months of the year.

“With the prolonged global geopolitical tensions and China’s zero-covid policy, the global supply chain continued to be in a tough situation in May,” BLF says in a statement on July 1. “This, coupled with the ongoing inflation hikes and global central banks’ tightening monetary policy, worsened growth expectations and dealt a blow to stock and bond markets.”

The pension supervisor says its funds will place greater emphasis on chasing long-term stable returns amid volatile market conditions.

“BLF adjusts portfolio allocation dynamically in response to market changes. It aims to control investment risk in an effective way and maintain stable long-term investment returns.”

The Labor Retirement Fund, Taiwan’s largest defined-benefit retirement scheme, was the worst performer among the eight funds with an average loss of 5.16% in January through May. The Labor Insurance Fund was the second worst, with a 4.89% loss.

In spite of the dismal investment performance, total assets of the eight funds increased 10.7% to NT$5.82 trillion as of end-May from a year ago thanks to members’ contributions.