Taiwan's Bureau of Labor Funds, which oversees NT$2.4 trillion (US$80.1 billion) in pension, retirement and insurance assets for Taiwanese workers, will boost combined allocations to alternatives to roughly 6% of total portfolio assets in the next 18 months from 2.3% at the end of April.
In a telephone interview, spokesman Terry Lin said the Bureau of Labor Funds could issue RFPs for the alternatives allocations — focused on real estate investment trusts and infrastructure — in early 2015.
By the end of 2015, the Labor Pension Fund, the biggest of the BLF's six funds with NT$1.14 trillion in assets as of April 30, will see its allocation to alternatives roughly double to 8% from 4.1%; the NT$610 billion Labor Retirement Fund's allocation will jump to 4% from just less than 1%; and the NT$560 billion Labor Insurance Fund will see its alternatives allocation rise to 5% from 0.64%.
Those three funds account for more than 95% of the combined assets overseen by the Bureau of Labor Funds. The Employment Insurance Fund, the Overdue Wages Payment Fund and the Occupation Incidents Protection Fund account for the remainder.
The Bureau of Labor Funds' combined investment portfolio assets should stand at roughly NT$2.6 trillion by the end of 2015, bringing a 6% allocation to alternatives to roughly NT$156 billion, up from NT$56.4 billion as of April 30.
REITs and infrastructure “both provide high dividends and stable cash flow, and offer defensive characteristics when the market is volatile,” Mr. Lin said in an e-mailed response to questions.
Asked about the BLF's longer-term plans for alternatives, Mr. Lin pointed to Towers Watson data showing global developed market pension schemes allocating roughly 18% of their investments to alternatives as a possible target. But he indicated that, as the BLF's alternatives allocations grow, progress toward boosting those allocations is likely to become more incremental — with the share of alternatives as a portion of the overall portfolio perhaps increasing by between 0.5 and 1 percentage point a year, he said.
