Schroders PLC, a leading global asset management company, is eyeing Taiwan’s national pension funds as the rapidly aging population presents a great business opportunity, company executives said in Taipei yesterday.
The London-based company, one of the earliest and largest foreign investors in the local equity market, said it saw ample growth potential in the government sector in Asia, including in Taiwan.
“The demographic trends in countries such as Taiwan, where there is an ageing population and a trend of having fewer babies, [means] the role of the public sector in addressing the pension implications is crucial,” Guy Henriques, global head of official institutions and Asia institutional business, said at a press conference to celebrate the firm’s 20-year presence in the nation.
Many countries now have special pension reserve funds designed to target a shortfall that will occur in two decades’ time, Henriques said.
Governments worldwide face increasing pressure to manage large pension assets effectively and to secure real rates of return over and above inflation and Taiwan is no exception, the institutional fund manager said.
“Managing the pension liabilities of a country is not easy, as we have seen in France this week,” he said.
Unions have turned to blockading fuel supplies in an ongoing attempt to pressure French President Nicolas Sarkozy to withdraw plans to raise the retirement age by two years.
Schroders is the only overseas financial firm to have located the head of its official institutions business in Asia, where the government sector also plays a major role in the management of the region’s assets, Henriques said.
“The reason that we have done this is because government entities make up a very significant part of our business and we wish to be as close to them as possible,” he said.
He refused to name the countries on grounds of confidentiality, but added Schroders works with almost all of Asia’s major government pension funds and sovereign wealth funds, as well as many of the region’s central banks. Globally, more than 50 percent of the total assets managed by the firm belong to major institutions.
Henriques, who worked at the Bank for International Settlements in 1998 and came to Asia to help the central bank resolve the regional financial storm, said “indebted” Asia has blossomed into “affluent” Asia over the past 12 years.
“Current concerns are not about stopping capital flight, but about controlling the large capital inflows and the strengthening of Asian currencies,” he said.
Economic growth in the region is far outstripping more developed nations and there seems no obvious sign that this trend will reverse soon, Henriques said.
As a result of this extraordinary economic growth, official institutions continue to move capital from the equity and bond markets of developed economies toward the capital markets of emerging economies, he said.
“One of the reasons that the large government pension funds in Asia are comfortable with emerging market risk is that they have seen how well these emerging economies have coped with crises in the past,” Henriques said.
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