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Big Funds You’ve Never Heard Of – Part IV
As part of my ongoing series entitled ‘big funds you’ve never heard of’, I’d like to draw your attention to... a big fund you’ve probably never heard of. Ready? OK let’s start with a few hints...
- As of March 31, 2012, this fund had $26 billion in assets under management.
- The mystery fund was created by the Malaysian Government to professionalize the management of the countrys pensions.
- In 2007, the new fund absorbed all of the powers, functions, activities, assets and liabilities of the old "Pension Trust Fund.
Can you name the fund? No?
The mystery fund is none other than Kumpulan Wang Persaraan (or KWAP for short). And I think youll agree that $26 billion qualifies this fund for my BFYNHO series. Anyway, KWAP has two primary functions:
- It administers and facilitates all the pension contributions; and
- It manages and invests all the national pension assets to meet projected liabilities.
Lets dig into number two for a second. In terms of investing, the funds stated objective is as follows:
KWAP targets to achieve a nominal risk adjusted return of 8% per annum over a five (5) year rolling period.
Thats actually quite high. And its made all the more challenging by the fact that the funds strategic asset allocation seems to weight fixed income assets heavily. So is it set up for failure?
Perhaps not, as the fund is rapidly professionalizing its operations and capabilities. If you read its 2010 annual report, youll be astounded at all of the good organizational work this pension fund has done. (In fact, Id wager that most US pension funds would read KWAPs annual report with great envy.) Moreover, the fund has been diversifying its investing as of late, adding overseas investments in equities, fixed income and even property. In addition, while the fund is largely a direct investor, it has been allocating a greater proportion of assets to external fund managers.
Anyway, make a note of KWAP it will be an increasingly big player in financial markets in the years ahead!