UniSuper Management Pty., the third-best performing Australian pension fund over 10 years, plans to buy more emerging Asian equities as the region’s economic outlook improves.
With company profits set to revive, the Melbourne-based pension fund is starting to see value in the region, Chief Investment Officer John Pearce said in an interview. UniSuper manages A$41 billion ($38 billion) mostly on behalf of Australian university employees.
“Our latest tactical shift has been to put more money into Asia,” he said. “We had a big overweight to Asia a few years back and then gradually wound it back. Once again, we are thinking of increasing our exposure to the region.”
Australian pension funds, which manage A$1.8 trillion, are putting more money offshore as they outgrow a domestic equity market dominated by a handful of industries. The MSCI Asia Pacific ex Japan index has returned 8.6 percent this year through Aug. 15, compared with a 3.2 percent gain for the MSCI World index.
Asia currently makes up 20 percent of the fund’s holding of global equities, down from 40 percent three years ago, Pearce said. The fund, which has 465,000 members, cut its exposure in response to a slowdown in the region, he said.
UniSuper invests in Asia through external fund managers and avoids other emerging markets such as Eastern Europe, Africa and South America, said Pearce, who joined the company in 2009 after two years as head of global asset management for Ping An Insurance (Group) Co., China’s second-biggest insurer.
UniSuper had an average rate of return of 8 percent in the 10 years to 2013, behind Commonwealth Bank Officers Superannuation Corporation Pty. on 8.1 percent and BEST Superannuation Pty. with 10.5 percent, according to Australian Prudential Regulation Authority data.
Average earnings per share for companies in the MSCI Asia Pacific ex Japan index are forecast to grow 11 percent in fiscal 2015 from 4.6 percent this year, according to analyst forecasts compiled by Bloomberg. The MSCI World index will slow on the same measure to 11 percent from 14 percent, the data show.
The pension fund uses managers such as Schroder Investment Management Australia Ltd., T Rowe Price Global Investment Services Ltd. and BlackRock Inc. for investing in international shares, which made up 20 percent of its assets as of June 2013, Pearce said.
Asian companies such as Samsung Electronics Co. (005930), Baidu Inc. (BIDU:US) and Tencent Holdings Ltd. (700) are among the fund’s top 20 international shares, according to its website.
Pearce declined to say by how much UniSuper planned to increase its Asia exposure.
“The economic outlook for emerging Asia is improving,” he said. “Earnings downgrades are probably hitting a trough and valuations are supportive. On the other hand earnings upgrades in developed markets are plateauing.”
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