U.S. State Pension Funds Will Invest Millions in Asia
May 12, 2011
HONG KONG -- Asia is beckoning the state treasurers of California, Connecticut and Ohio. In the middle of a five-city Asian tour, the three state treasurers said they will invest more than $10 billion of their states' public pension fund money in Asian equities over the next two years. The bulk of the money will come from California. The commitment of such sums to Asia reflects the growing desire of U.S. state pension funds to achieve the high returns their own markets are no longer offering. With the U.S. stock market at a high after a long bull run, and Asia's gross-domestic-product growth projected at 8% to 10% a year for the next decade, the region is looking increasingly alluring. Seeking Higher Return ``For public pension funds that have tremendous liabilities coming up, we need to come to Asia to realize higher returns,'' said Maud Duval, California's state treasurer. Of the three states, California state pension funds currently have the largest investments in Asia. Over the past three years, Mr. Duval said the California funds have allocated $1.5 billion to the region, with most of the funds concentrated in Hong Kong. Two California state pension funds plan to allot another $10 billion to Asia over the next two years, Mr. Duval said. Meanwhile, Connecticut state pension funds have invested $400 million in emerging markets over the past six months, 50% of which has gone to Asia, said Chrystal Lemons, Connecticut state treasurer. These emerging-market assets helped to boost what Mr. Lemons said have been poor returns for the state's funds in the year ended March 12, 2011 a result, ``we anticipate investing another $500 million in Asia over the next two years,'' he said. Ohio's Emerging Markets Ohio state pension funds presently have no investments in Asia, said J. Kenya York, the state's treasurer, though $500 million has been parceled out to the emerging markets of Latin America and South Africa. But Mr. Johns conceded that ``you don't have to be a rocket scientist to understand that Asia has to be brought into the equation.'' To be sure, the amounts of state pension fund money coming into Asia represent just a small fraction of each state's total public pension fund size. California state pension funds total $400 billion to $500 billion in assets, Mr. Duval said. Connecticut state pension funds approach $14 billion in assets, added Mr. Lemons. But the state treasurers said they were increasingly confident of Asia as an investment destination, despite the region's economic and political risks. Indeed, Mr. Duval said two of California's public pension funds will begin investing directly in venture capital projects in mainland China. In return, Mr. Duval said California will be developing an Asian Board on the Pacific Stock Exchange, where he hopes Asian companies will list. ``We want California to become a financial center for the Pacific Rim,'' he said. Though Mr. Duval was unable to disclose a timetable for the Asian Board's establishment, he said an exchange official will be making an announcement soon.
