Church Pension Fund, a $17 billion New York-based pensions manager, has reduced exposure to China's private equity market and slowed the pace of investment amid geopolitical tensions, according to its private equity chief.
However, the fund remains engaged and committed to the market.
“I'm hoping that we remain engaged and committed to investing in China under the restrictions but we have to be cognizant of the geopolitics. You really shouldn't be in areas that are very, very sensitive,” said Eric Mason, head of private equity at the Church Pension Fund.
“A lot of our GPs (general partners) are not coming back as fast. So, it's sort of a ‘don't ask, don't tell’ type of situation so far,” Mason said during a panel of the recent Asia Private Equity Forum hosted by the Hong Kong Venture Capital and Private Equity Association (HKVCA).
Mason was chairman of HKVCA from 2015 to 2018.
Church Pension Fund is a private tax-exempt organisation based in New York with $17 billion in assets under management as of March 31, 2023.
It provides pension benefits to those serving the Episcopal Church.
Mason opened the fund's Hong Kong representative office when he joined in 2009 as head of Asia and was based in the city until 2022, when he relocated to New York and took on the global role.
As Church Pension Fund’s global private equity head, Mason also has oversight of investments in Asia.
“The biggest lesson learned going back to the States is that the rift in US-China relations is pretty meaningful and it has cast a pretty dark cloud over the ability to make new commitments in the region associated with China,” he said.
“I believe, personally, that's overdone. But you still can't fight this common perception.”
Public pension funds and endowments in the US have been under domestic pressure to divest their China investments amid geopolitical tensions.
In August 2023, the Biden administration issued a ban on new investments by US investors in China’s quantum computing, advanced chipmaking, and artificial intelligence companies over national security concerns. It is set to take effect in 2024.
Mason believes the HKVCA and investment community in Asia needs to do a better job of explaining why Hong Kong and mainland China are still good sources of return for investors and pension beneficiaries.
“We are still very constructive about the innovation and growth here in Asia,” he said, noting the pension fund is skewed towards venture capital, without elaborating on what opportunities he sees in Asia.
Asia is the fund’s largest overseas investment destination with 15.8% of AUM invested, following its 64.7% exposure in the US.
Due to the denominator effect, the private equity portfolio was almost 23% of the AUM, well above its typical range of 15-17%, Mason said.
“Then we layer in geopolitics. It makes it quite challenging to be committing to new funds when you have both the denominator effect and all these macro politics,” he said.
He emphasised that the pension fund is keen to make investments in down markets as great companies and returns were historically made right after financial crises or major market downturns.
"It's easier said than done," he said.