Asia Pacific pension funds lead global peers in AI adoption
Asia Pacific pension funds have been transforming their investment approaches through technological innovation while maintaining strong conviction in both public and private market opportunities, according to the latest Schroders Global Investor Insights Survey 2024.
The findings revealed a region setting new benchmarks in both operational sophistication and investment strategy.
"Almost all pension funds in Asia Pacific are currently using artificial intelligence (AI) or plan to do so in the next one to two years,” Schroders researchers told AsianInvestor.
“The primary use cases are internal operational efficiency (41%), investment research and analysis (36%), and risk management and monitoring (33%).”
Funds in the region have fundamentally changed how they operate and manage risk through AI, with implementation rates exceeding the global average of 91%.
The focus on technological tools comes as institutions face multiple market challenges.
"They see political risks (57%), liquidity crisis (55%), and macro-economic risks (51%) as the biggest threats to fixed income investing in the next one to two years," the researchers said.
"In addition, they believe alliances on politics and trade (51%) will have the greatest effect on investment in the next five years."
Pension funds are not alone in their technological push. Other regional asset owners have been similarly leveraging technology to navigate market complexities.
The central bank of Bangladesh, for instance, has been using tech solutions to manage its $26 billion in foreign exchange reserves. The monetary authority’s director of Forex Reserve and Treasury Management noted that a tech-driven approach offers greater accuracy and risk-adaptability to new market trends.
STRATEGIC ALLOCATIONS
The survey also revealed pension funds across the Asia Pacific, as well as globally, are operating in a very challenging environment.
"Overall, high interest rates (71%), central bank policy (65%), and economic downturn (64%) are the top three issues that pension funds in Asia Pacific expect to have influence on portfolio performance in the next 12 months," the researchers said.
Still, APAC pension funds have maintained strong conviction in global markets.
"Funds in this region are the most bullish in global equities, with 74% of them planning to increase their allocation to this sub asset class in the next one to two years," the researchers said. The figure for Asia was notably higher than the global average of 55%.
PRIVATE MARKETS
Private market allocation also exceeds global trends, with APAC pension funds showing higher interest than the global average of 94%, the survey showed.
Across the region, the trend has been discernible. In Malaysia, KWAP has committed $9.3 billion to domestic private markets, while Australian pension funds are expanding their private-market presence.
According to Morningstar's 2025 outlook, the Australian pension sector currently allocates around 16.5% of assets to private investments, with industry funds' allocations exceeding 20%.
"Nearly all pension funds in Asia Pacific said they currently invest or plan to invest in private markets in the next one to two years," said Schroders’ researchers.
"A majority plan to increase their allocations to private assets in the next 12 months, with 61% planning to increase allocation to private equity, followed by private debt (59%), and securitised / asset-based finance (55%).
"Nearly three-quarters of pension funds in Asia Pacific favour active managers for specialist approaches in equities investment," according to the study, higher than the global average of 70%.
SUSTAINABILITY AND RISK
The survey indicated APAC pension funds have increased their focus on sustainable investments, exceeding the global trend of 93%.
"Nearly all pension funds in Asia Pacific are currently investing in or plan to invest in the next one to two years in energy transition," the researchers said. "They believe the best investment opportunities in this space are power grid infrastructure (55%), emergent technologies (52%), and traditional renewable energy (40%)."
Broad usage of the thematic investment approach was a reflection of broader diversification goals.
"They plan to increase their allocation to thematic equities (48%) in the coming two years, which is higher than the global average of 39%, reflecting a desire for diversification," according to the study.
The survey also found 57% of Asia Pacific pension funds view technological revolution as best accessed via private markets. Meanwhile, 55% noted the energy transition and decarbonisation.
The funds’ approach to the energy transition has been driven by portfolio decarbonisation (44%), diversification (34%), and societal impact (34%).