Singapore’s Temasek is contemplating allocating more capital to core-plus infrastructure projects, especially investments related to data centres, energy transition and ageing facilities as the S$434 billion ($338 billion) fund walks the balance between risk and return. 

In a post-annual results media briefing, chief investment officer Rohit Sipahimalani said infrastructure was an asset class starved of capital, particularly around AI, and presents significant opportunities. The fund deploys capital via direct, partnerships and fund investments. 

“We are not looking at basic infrastructure, which is already up and running and generating cash flows, because the returns there probably do not meet our thresholds,” he said. 

“That is why we are looking at core-plus infrastructure, where there is some development part, but they also have stable, long-term contracts with some inflation protection.” 

An example of Temasek’s core-plus investment is the establishment of energy provider O2 Power in India alongside European asset manager EQT in 2020. The company was sold this March for $1.5 billion.  

The fund also invests in Brookfield’s renewable-focused Global Transition Fund, and is part of the AI Infrastructure Partnership group that funnels capital into AI-related projects, established by BlackRock, GIP, Microsoft and MGX. 

Sipahimalani said core-plus infrastructure is a great source of cash yield which the fund appreciates in uncertain times. It also finds private credit attractive for that exact reason. Temasek is likely to stay away from higher-risk private credit but chase strategies with low double-digit returns and high yields.  

He said core-plus infrastructure and private credit might not offer high returns like a leveraged buyout, they are attractive because they offer a “narrower range of outcomes”.  

Last fiscal year, a standalone private credit platform called Aranda Principal Strategies was carved out of Temasek’s in-house credit team. It manages a S$10 billion ($7.8 billion) portfolio of Temasek’s funds and direct investments.  

Temasek does not disclose asset class allocations, but Aranda sits within Temasek’s partnerships, funds and asset management companies category, which represents 23 per cent of the total portfolio. The other two segments are Singapore-based companies (41 per cent) and global direct investments (36 per cent).  

“Given the fact that compared to the last decade when interest rates were close to zero, base rates have gone up, we find it gives us pretty attractive returns with relatively low risk,” Sipahimalani said.  

Liquid alternatives like multi-strategy and macro hedge funds are another focus of the fund which Sipahimalani estimates could secure “fairly stable double-digit returns” regardless of equity market environment.  

China story 

In terms of geographic allocations, Temasek’s exposure to China has hit a decade low in 2025 as the fund gradually shifted its capital to US and European markets. However, Sipahimalani believes there is now less downside risk in China’s economy as the government pledged to cushion any growth shocks, not to mention that asset valuations are “quite reasonable”.  

The fund’s exposure to China decreased from 19 per cent of the portfolio in 2024 to 18 per cent in 2025, although in dollar terms the allocation is up by S$4 billion ($3.1 billion). Still, there has been a meaningful reduction compared to a recent high of 29 per cent allocation in 2020.  

Underlying portfolio exposure. [Click to enlarge]
Sipahimalani said while he does not see a “rapid recovery” of Asia’s largest economy due to sluggish consumption and real estate market, some Chinese businesses in consumer goods and food and beverage sectors are throwing up attractive opportunities, such as Pop Mart – the brand fuelling a global craze for its toothy Labubu dolls.  

“We need to shift our priorities to align with views of China as a more mature economy,” Sipahimalani said, adding that the nation will not see the same level of explosive growth as it had in the past decade.  

“In the renewables space, there are significant opportunities like in EVs and batteries. Also, we recently invested, for example, in companies operating commercially distributed solar generation, like rooftop panels.” 

Four of Temasek’s top 10 listed holdings are Chinese enterprises including WeChat owner Tencent, e-commerce giant and new AI infrastructure darling Alibaba, delivery service Meituan and Ping An Insurance.  

Over half (53 per cent) of Temasek’s portfolio is anchored in just three countries: Singapore, China and India. But Americas (24 per cent) is the second largest single allocation after the domestic market (27 per cent), and Europe, Middle East and Africa claimed 12 per cent.  

Its offices in Americas, including New York, San Francisco, Washington DC and Mexico, accounted for the lion’s share (33 per cent) of the S$155 billion ($120 billion) direct investment portfolio.  

The decrease in China exposure was only natural as Temasek repositioned as an Asia-focused investor to a global fund, Sipahimalani said. Moving forward, adjustments to geographical allocations will be “marginal” and hinged on bottom-up opportunities and individual market performance.  

“We are quite happy with the relative positioning we have across markets… you will not see the same level of changes or big moves that you saw over the last decade,” he said.  

US looks expensive 

Contrary to what it is seeing in China, Sipahimalani said US equity valuations are looking high at 22 times earnings.  

“They are probably at the top decile of the last 70-80 years. We have to be disciplined and conscious when we make investments,” he said.  

“In the medium term, there is always going to be the debt issue but we do not think that is an immediate issue. But we have to think about that with a long-term perspective, and what it means for the US dollar.” 

The fund is also grappling with the biggest investment question in the past few years, which is what it would take for US exceptionalism to collapse. However, Sipahimalani admitted that he does not have a clear answer yet and expects the US to remain the biggest recipient of its capital unless some extraordinary event happens.  

“There is nothing we can foresee [to make us pull back from the US]. Things happen that none of us can predict,” he said. 

“AI is a clear example. Nothing we can foresee will cause us to change that. We had mentioned last year about our plans to invest $30 billion over five years in the US and we are well ahead of that pace.” 

Temasek has been shifting its portfolio to businesses that are less likely to get caught in the crossfire of trade conflicts in the past several years – a strategy that is paying off with US’ renewed threats on several trading partners, including a 10 per cent levy on BRICS countries this week.  

For example, in China and India, the fund does not have any investment that relies on exports to the world. The focus in India has been on financial services, healthcare and consumer businesses in the past few years.  

“None of them had any first order impact from tariffs. The same is true across most regions,” Sipahimalani said. “The second order impact, based on global growth, would impact everyone.” 

Temasek invested S$52 billion and divested S$42 billion last fiscal year. The 10-year and 20-year total shareholder return – a compounded and annualised figure which includes dividends paid by Temasek and excludes investments from shareholders – is 5 and 7 per cent respectively in Singapore dollars.  

North Carolina’s new Republican state treasurer Brad Briner believes he has moved a step closer to overhauling enduringly weak investment performance at N.C Retirement Systems by ditching the sole fiduciary model for a five-person board of trustees.

Legislators recently approved a new governance model that Briner is convinced will open the door to the $127 billion North Carolina Teachers’ and State Employees’ Retirement System’s (TSERS) ability to take more risk and earn higher returns. It’s a message he sold hard in his campaign rallying call to North Carolina’s beleaguered employers, whose contributions have steadily risen in support of the pension fund, and the state’s retirees, who have had no COLA adjustments for years.

But North Carolina’s pension fund beneficiaries may have less influence on the new, five-member board than the state’s taxpayers. There will be no board representation for beneficiaries, and North Carolina’s politicians will get to decide the makeup albeit with a keen focus on hiring investment experts. Briner is chair and will also appoint one member while the other trustees will be selected by elected politicians comprising the Governor, House speaker and president of the Senate.

Briner is also loath to expand the board because he believes a small board preserves the best features of the sole fiduciary model: decisiveness.

“Decisiveness is endemic of good investment decision making,” says Briner, speaking to Top1000funds.com from North Carolina’s Raleigh investment offices.

Moreover, unlike other public pension fund CIOs who argue that pension plan trustees’ only obligation is to beneficiaries, Briner believes that taxpayers and beneficiaries are two sides of the same governance coin.

He believes the pension fund’s new trustees can wear two hats and represent both beneficiaries and taxpayers and taxpayers are just as important [as beneficiaries] because they are on the hook for poor returns from the pension fund.

“It’s the education piece I am always surprised more people don’t know,” says Briner who studied governance models at public pension funds in Virginia and Florida particularly, and whose investment experience includes a decade as co-CIO for Willett Advisors which manages the philanthropic and personal investments for Mike Bloomberg.

“To the extent the pension trust is exhausted, the pension obligations we incur in the state are the liabilities of the taxpayer. If you are a retiree in the state, you should feel great that the pension system is 89 per cent funded but feel even better because taxpayers have your back too. We pay those obligations under every scenario and the flipside as a taxpayer is that you can’t just be academically aware of this. You need to know if the trust is exhausted you are on the hook. The employer contribution, now over 17 per cent for our state, is coming from your tax dollars and there are ways to lower that by investing properly and ways to raise it by investing poorly – something we’ve been doing a lot. Enough with finishing last and burdening the taxpayer; enough with impoverishing retirees, let’s get this right,” he says.

North Carolina’s three, five and 10-year annualised net returns ending June 2024 came in at 1.9 per cent, 5.6 per cent and 5.6 per cent respectively.

Trustee competence assured

Briner says trustee competence will be assured by all candidates meeting certain stipulations.

They must have a minimum of 10 years of successful investment management and boast a record that demonstrates their passion, professionalism and technical expertise. Briner is looking for CIO-level candidates that come “purely from the buy side” to avoid any conflict of interest, and he says there will be no pandering to diversity in the selection process either.

“We want people who bring different perspectives and speak their mind, but I am indifferent to the exact physical package that comes in.”

Nor will there be any compensation.

Asking new trustees to volunteer ensures North Carolina won’t get people “for the wrong reasons” and he believes there are enough experienced candidates with subject matter expertise who are committed to the success of North Carolina to help.

“In the endowment world, many large boards are uncompensated, peopled by experts willing to serve. The job requires a couple of hours a week at most and their presence at big meetings quarterly.”

Increasing the risk

One of Briner’s key complaints with North Carolina’s sole fiduciary model is that it has prevented risk taking. He argues that because previous incumbents have been directly accountable for the performance, oversight and management of the portfolio they have been risk averse.

“The extreme public scrutiny that comes with the sole trustee model leads to risk aversion. A sole fiduciary will go to great lengths not to lose taxpayers money, yet over-reacting to short term downturns in the capital markets is expensive.”

Moving to a board model will allow the investor to be more methodical and executional and will introduce firm policies over “emotionally driven individual decisions.”

The new governance structure also shakes off the towering legacy of Harlan Boyles, state treasurer between 1977 and 2000, in office for a total of 25 years during which period he was re-elected five times. North Carolina’s large allocation to fixed income, maintained by subsequent treasurers, was a hallmark of his investment strategy.

“Harlen Boyles was a larger-than-life treasurer who did a fantastic job for the state,” reflects Briner. “He had a large allocation to fixed income that had always worked because base rates were higher. However, when base rates hit zero the pension fund remained stuck in the old orthodoxy because ever since everyone has looked back and said, ‘Harlan did it right and we need to do the same.’

First out of the gate Briner wants to increase the allocation to sub investment grade fixed income from 7 per cent and reduce investment grade fixed income, currently 33 per cent. He also wants to pare back on the 4.5 per cent allocation to cash, out of whack with a net spend of less than 2 per cent and North Carolina’s ample sources of liquidity.

New allocations will include mortgages that will either sit in opportunistic fixed income or real estate.

As for private assets, he’s in no rush to develop an allocation to private credit or “dive” into more private equity just yet.

“I’m conscious that while interest rates have gone up on the average leveraged private transactions, entry multiples for equity have not declined and this is a challenge of basic maths for private equity.”

He says it’s possible for investors to find exceptions to that average in allocations like LP secondaries and says leading GPs are more open to dialogue in the current environment.

As well as adjusting the allocation, Briner wants to update the legal list which prescribes which asset class North Carolina can and can’t own, untouched for 15 years.

He also plans to build out the investment team that has been whittled down to 19 from a high of 45. An empowered team under the revived leadership of former CIO Kevin SigRist, who Briner has brought back to lead on investment will be supported by a new investment authority backed by policies, procedure, staff and IT, supported by a budget set by the board.

“I knew I could make a difference in a way that mattered, and I wanted to run for it,” concludes Briner. “In reality people are not paying as good attention to the pension systems as they should, they matter tremendously, not just to the people involved in the retirement system, but to every taxpayer in the state.”

A quest for manager and fund strategy diversification has led the largest pension fund in the world, Japan’s Government Pension Investment Fund, to reach a decade-high allocation to active global equities.  

Actively managed assets now make up 17.8 per cent of GPIF’s ¥61.9 trillion ($423.6 billion) foreign equities portfolio as of March 2025, according to its annual report published last week. 

Across the whole fund, the proportion of active management is also increasing in domestic bonds, while foreign bonds and domestic equities are trending towards passive.

Percentage split of passive and active investment

FY2015 FY2020 FY2024
Domestic bonds Passive 82.50 72.93 54.33
Active 17.50 27.07 45.67
Foreign bonds Passive 64.94 76.12 96.00
Active 35.06 23.88 4.00
Domestic equities Passive 81.52 92.97 95.40
Active 18.48 7.03 4.60
Foreign equities Passive 84.15 87.99 82.20
Active 15.85 12.01 17.80
Total Passive 79.28 82.69 81.84
Active 20.72 17.31 18.16

Source: GPIF 2024 annual report 

The overhaul of GPIF’s active equities portfolio, whose centrepiece is a “scientific framework” of manager selection, began in 2021 when the seven active foreign equity managers GPIF employed at the time simultaneously underperformed their benchmarks. 

Last fiscal year, the $1.7 trillion pension fund said it had finished dividing the active equity portfolio into four regions: North America, domestic, developed markets excluding Japan, and developed markets excluding North America.  

The portfolio now consists of 103 funds, including active funds and completion portfolios called “beta balancers”, with a value of ¥17 trillion ($116 billion). The number increased fivefold compared to five years ago when GPIF only invested in 20 active funds. 

Wake-up call 

The underperformance of the seven active managers in FY2021 was a wake-up call for GPIF, as the correlation of each fund’s excess returns increased when market volatility surged in the second half of that fiscal year due to Russia’s invasion of Ukraine.  

GPIF immediately reduced its active equity allocation by ¥2 trillion that year as it considered how to reduce concentration risk that comes from allocating to similar funds.  

The solution it came up with was a new “scientific framework” of manager selection, which uses quantitative and statistical models to analyse investment styles. It will identify managers and funds that can deliver consistent, “style-adjusted alpha” by evaluating a fund’s performance against a benchmark in their intended investment universe – for example, a small cap fund in the US will not be pitted against the regular benchmark dominated by large mega cap stocks. 

Some passive beta balancer funds were also created to ensure the fund stays close to the benchmarks of its policy asset mix.  

But despite its reboot, the total active equity portfolio underperformed the benchmark by ¥71.6 billion ($487.2 million) in FY2024.  

The beta balancers weren’t able to offset the active risks sufficiently due to some market events driving significant price movements above GPIF’s expectations. In the annual report, Yoshizawa Yusuke, who rose from the deputy position to become the CIO this April, pointed to the sharp drop of Japanese equities last August partially triggered by a surprise rate rise from the nation’s central bank, and surge in some US stocks between October and December prior to the US presidential election.  

Expanding the manager pool has been a focus of GPIF in recent years, as the fund last year scrapped several hurdles – such as AUM and years of service requirements – for smaller and upcoming managers who want to offer their services. GPIF invested with 41 managers and 216 external funds across all asset classes as of this March.  

Modest return 

GPIF logged a modest 0.71 per cent total fund gain in FY2024 and a 4.2 per cent annual rate of return since FY2001. Foreign equities was the biggest contributor last fiscal year with a 6.62 per cent return while domestic bonds saw the biggest loss of 4.47 per cent.  

The fund’s asset allocation consists of domestic bonds (27.64 per cent), foreign bonds (24.37 per cent), domestic equities (23.94 per cent) and foreign equities (24.05 per cent), combining with a 1.63 per cent alternatives allocation. It reduced foreign equities and added mainly to domestic bonds during FY2024 due to rebalancing.  

Over the last decade, the proportion of actively managed domestic bonds shot up from 17.5 per cent to now represent 45.67 per cent of the asset class. The reverse trend is seen in foreign bonds whose share of actively managed assets dropped from 35.05 per cent to 4 per cent.  

GPIF said it terminated various “comprehensive active funds” in foreign bonds as it became difficult to control foreign exchange, interest rates and credit risks. Instead, it has been enhancing its lineup of region-specific and security-type-specific passive funds. 

In alternatives, GPIF invested in four infrastructure projects, two private equity deals, and one real estate deal during FY2024.  

GPIF revised its policy asset mix for the five years beginning this April, after six rounds of discussions with the board of governors. Due to its size, the fund’s investment strategy tends to influence other asset owners in Japan such as corporate pension plans and the asset mix tends to be closely monitored. 

The target asset allocation is still split equally four ways between domestic and foreign bonds and equities, but it has introduced tighter deviation limits for each asset class.  

Alternatives have an upper limit of a 5 per cent allocation and each asset is classified into one of the four equity/bond asset classes depending on its return profile.  

Having completed its first year with a fully invested portfolio, the ¥11 trillion ($77 billion) Japan University Fund (JUF) is now ramping up active strategies and carving out country-specific passive allocations.

The fund is a young endowment only established in 2022 to support research and development at Japanese universities, whose output and quality have declined compared to international counterparts over the past two decades, according to annual indicators published by the Ministry of Education, Culture, Sports, Science and Technology (MEXT).

It sits within the Japan Science and Technology Agency and was seeded with ¥10 trillion by the Japanese government – 11 per cent as an investment, 89 per cent as a fiscal loan. Unlike traditional Japanese pension funds focused on meeting minimum return targets, JUF has a mandate to maximise returns within its risk limits.

As part of a new strategy focusing more on active management and closer manager collaboration, the fund has several RFPs in market including for active managers in US and emerging markets equity, as well as European credit. It is also preparing some country-specific passive equity allocations to reduce the current large, index-driven US exposure.

JUF prides itself on being a new breed of Japanese public allocators that are more adaptive to high volatility and structural changes in the markets, and new external managers who want to join the fund’s expanding roster should champion the same qualities, says co-chief investment officer and head of global investment Naoya Sugimoto.

“Typically, the public investors try to be more conservative, but we are not the case. We try to adapt the new world, and we ask managers to be more flexible as well,” he tells Top1000funds.com.

“And if they feel there are restrictions of [mandate] guidelines, then we can talk about the relaxation of the guidelines to reflect the new world of the investments or a new market.”

Sugimoto’s own career reflects the new age of finance professionals as the industry moves towards more quantitative and technology-based skills. Starting as an artificial intelligence researcher, he moved on to work in cryptography with a focus on microchip encryption, such as how personal information like fingerprints can be stored on passports.

He entered the finance industry as a quant researcher managing mortgage repayment models and valuations of rates derivatives at Credit Suisse in 2007. “I was not familiar with the market at all,” Sugimoto admits. “I was good at, you know, mathematics, programming and computer science.”

His background as an engineer and scientist gives Sugimoto a special affinity to initiatives at JUF and in 2022 he was headhunted from his then position at Goldman Sachs.

Hit the ground running

JUF had a 25.7 per cent allocation in global equities as at the end of March 2025, out of which 2.1 per cent is active investments, according to its annual report released last Friday. During FY2024, the fund added active strategies including in Japanese equity, Sugimoto says.

“We’re gradually implementing active management. At the beginning, we had to invest from day one, and we did not have time to select the [active equity] managers, so we started from passive ETFs and passive managers,” he says.

Global fixed income still represents the majority of the portfolio with a 65 per cent allocation – 50.2 per cent of that allocation is managed in-house, 6.9 per cent is external passive and 7.9 per cent is external active.

Managing a large portion of fixed income in-house allows the fund to more easily manage liquidity and risk, Sugimoto says, and is not just focused on returns

“We manage the forward balancing, the total portfolio risk level, and the total portfolio factor balancing like currencies or durations [through the in-house team]. So from that point of view, what the fixed income team is managing towards is not to beat the benchmark,” he says.

Alternatives, including private equity, private debt, real estate and infrastructure, account for 8.2 per cent of the portfolio and short-term assets like deposits make up 1.2 per cent.

The fund’s total annual return was 1.7 per cent but alternatives outshone all other asset classes with an 8.6 per cent return, due to valuation increases centred around secondary strategies, the annual report said. Global fixed income and equity, which also include domestic Japanese assets, delivered 0.2 per cent and 4.5 per cent respectively.

JUF’s mandate is to maximise returns within the risk tolerance of a 65:35 reference portfolio set by the government, and it uses a factor-based approach to control risk.

“For example, the US equity from Japanese investment point of view, they have the US equity local factors, and also US dollar currency factors. We are distinguishing that difference,” Sugimoto says.

“When we invest in the US corporates, there are interest rate duration factors, and also the corporate spread factors.”

The sweet spot

JUF’s current portfolio is intentionally more conservative than the reference portfolio because it is building a stable financial “cushion” for the eventual repayment of the government fiscal loan, set to begin in 20 years.

“We are overweight fixed income, but that is not reflecting our market view – this is reflecting the equity cushion accumulation,” Sugimoto says.

“Also we have a meaningful portion of private assets… It takes time for actual asset investment from commitment, and we see the vintage diversification [benefits] for the private assets.”

Sugimoto says for JUF, it’s more about finding the sweet spot between strategic asset allocation and a total portfolio approach.

“For controlling risks, the factor is important, rather than asset classes. From that aspect, we are part of total portfolio approach,” he says.

“But from the organisational point of view, they [TPA funds] are managing investments in a generalist style… they are managing whether the investment is above the target return of the total portfolio or below.

“Our approach is more like an asset class-based organisation, because we would like to accumulate the knowledge or experience in each team.”

With that said, JUF still actively encourages asset class teams to communicate and break down silos. For example, when the asset allocation team is forming macro views on matters like wage growth, the public and private equity teams may have on-the-ground input from their portfolio companies.

“That’s live activities or live sentiments that can be reflected to the asset allocation or vice versa,” Sugimoto says.

JUF’s next long-term objective is to achieve an annual investment profit of ¥300 billion and no later than FY2026 – an estimate of how much it takes to support the universities in the long term.

It will remain in the so-called “ramp-up period” of the portfolio until the policy portfolio allocation is achieved, which should be no later than FY2031.

Tohoku University was the recipient of the first government research grant funded via JUF in 2024, which will be distributed yearly for up to 25 years. Eight other universities are in the race this year, including the University of Osaka, Kyoto University, Waseda University, the University of Tokyo, Kyushu University, the Institute of Science Tokyo, the University of Tsukuba and Nagoya University.

University Pension Plan Ontario, the C$12.8 billion ($9.3 billion) plan that invests on behalf of five Ontario universities, doesn’t own many US treasury bonds, and the largest single exposure in the portfolio is Canadian.

But US policies under the second Trump administration have got CIO Aaron Bennett thinking differently about risks and opportunities in asset classes, and the team are incorporating different scenarios into their modelling and analysis.

The threat of additional taxes on foreign holdings of US assets outlined in Trump’s “big, beautiful tax bill” could drive some asset prices lower, for example.

Elsewhere, new investment opportunities have emerged in the rest of the world off the back of US policy like Germany’s “whatever it takes” plan to increase defence spending and overhaul German infrastructure, financed by the largest economic stimulus in decades.

Closer to home, UPP is already investing in Canada’s own nation-building projects, particularly in renewables.

“We are stress testing hard and thinking about wider risks and opportunities from the current US administration’s polices, and being careful about investments priced in such a way that reflects incremental risk,” Bennett tells Top1000Funds.com.

UPP has just posted its second consecutive double-digit return (10.3 per cent) and the strategy at the fund that was set up in 2021 shares many of the hallmarks of the Maple 8. Governance is independent and arms-length; there is a keen focus on purpose as well as a risk approach, rather than a dollar allocation approach, to investment. Indicative of UPP’s high allocation to private markets and direct participation models in the quest for low to no fees, the investor has also committed over C$1 billion to new private market strategies since 2022.

Yet unlike its much larger Canadian peers, UPP has much less internal investment and prides itself on tapping niche strategies, sometimes investing as little as C$100 million in a new fund commitment and a co-investment of just C$10-15 million.

A focus on active management

UPP currently has around 35-40 per cent of the portfolio across public and private markets in active strategies.

Bennett believes active managers performed well during the recent market volatility, successfully navigating sector concentration, accumulating cash and waiting for the opportunity to buy back into the market.

“We pay fees for additional return, additional diversification and risk management. It paid off during the recent market volatility when active managers were very well positioned.”

But he’s keen to fine-tune active management to ensure UPP “gets paid” for active performance in excess of the benchmark given the cost of active management. “Sometimes you can end up paying a lot more in fees if you are not careful,” he says.

UPP will increasingly allocate to managers that want to get paid to beat their benchmark with a performance fee, rather than a management fee. “We’ve moved a number of large active managers over to fee schedules that are more focused on getting paid when they do what we expect them to do – which is beat the benchmark.”

As UPP’s assets under management have grown and more pension funds have joined the investor has merged around 22 different benchmarks. Today those benchmarks are consolidated into one benchmark for each asset class. They are reviewed every year to ensure they make sense from an overall asset allocation and risk management position, and Bennett reflects that “by and large” they do the job.

For example, inflation-sensitive assets comprising real estate and infrastructure are typically benchmarked to inflation. “In infrastructure and real estate, we are focused on finding assets that have cash flows, value and distributions which are correlated to inflation over time, so a CPI+ benchmark is sensible.”

Still, looking ahead he is considering the benchmark for private credit. “Private credit is an evolving space, and the benchmark should be aligned to strategy. Overtime we might change the benchmark to better suit our criteria.”

A cautious approach to internal management

Internalisation of the investment process to foster greater control, transparency and lower costs is being built out slowly and Bennett describes a lean and efficient investment team with “every person counting.” To date, he has concentrated on the basics, internalising currency hedging and derivatives, and some passive equity and fixed income.

Looking ahead, he wants to manage UPP’s cash exposure to money market funds and build out fixed income and derivative in-house management to support total fund risk management internally, spanning leverage and overlay strategies.

“This way we can manage risk at the top of the house, while actively deploying externally to asset classes.”

He is confident UPP will be able to draw top talent as it expands despite Canada’s competitive market. He says staff are attracted to the organisation because of the opportunity to build something from scratch, as well as the investor’s forecast growth as more university plans decide to partner with UPP.

Another draw to talent is UPP’s modern appeal. “We have established investment beliefs in the context of a modern world. For example, we have a clear view of responsible investment and are not having to integrate a programme around change management.”

He adds that DEI at the investor where two women (CEO and board chair) occupy senior roles encourages the belief that people can grow their careers. “Young professionals can see themselves reflected in senior management at UPP in a way that might not be the case at other organisations. Talent recruitment and retention remains a focus and this has made it easier for us.”

Bennett is also focused on growing the allocation to climate solutions where UPP has already poured C$650 million, on track to have invested $1.2 billion globally by 2030.

Strategy is shaped around being careful not to invest in assets heavily reliant on, or that require, subsidies from governments. Diversity is ensured by a global approach that spans different tech, countries and regulatory regimes, he concludes.

The $206.5 billion Korea Investment Corporation (KIC) has become the latest asset owner weighing a shift into the total portfolio approach (TPA) in an attempt to boost investment returns.   

KIC put out a request for proposal for a TPA consulting partner in May. A fund spokesperson confirmed that the review is underway and will continue into early next year, telling Top1000funds.com: “We are considering the introduction of this new investment framework to expand our role as a fiduciary manager and to enhance investment returns.” 

The deliberation came as KIC celebrated its 20th anniversary in Seoul this week, where CEO Park Il Young outlined the fund’s goal to boost financial and organisational performance in the next decade.  

Its asset allocation as of last December was 39.5 per cent equities, 31.8 per cent fixed income, and 21.9 per cent alternatives whose build-out has been the fund’s focus in the past few years. It previously set a target of having a quarter of its portfolio invested in alternatives by 2025. 

Under the overarching goal to find a feasible TPA framework for KIC, the review will look to introduce a reference portfolio and a factor-based approach to dissect asset class exposures to risk and return drivers. It will also examine new ways to classify investments other than by asset classes as in SAA.  

The fund also wants to develop liquidity forecasting models by asset class and strategies and understand how risk and liquidity will be considered on a total portfolio level.  

KIC’s current risk management process considers market risks for traditional assets, namely equity and fixed income, and alternative investment risks separately. Market risks are managed through the SAA framework of tracking errors and portfolio volatility, while alternative risks are contained by designating allocation limits for external managers relative to total value of assets in each alternative asset class, and by monitoring factors like concentration, region, sector and vintage.  

Organisationally, the TPA review will determine whether it’s necessary to introduce an “integrated portfolio management” division and define their roles. KIC wants to align its framework with global practices so the review will involve extensive case studies of asset owners with existing TPA models. 

TPA organisations outperformed their SAA peers over the last decade by 1.8 per cent per annum, according to a study by WTW’s Thinking Ahead Institute of 26 asset owners. Despite its onerous demand on asset owners’ investment, risk, governance and even sustainability models, more funds are pondering the adoption of TPA (such as CalPERS) due to benefits including better alignment of portfolio goals and room for nimble, opportunistic investment.  

Well-known practitioners of TPA in Asia Pacific include Singapore’s GIC, Australia’s Future Fund, and New Zealand Superannuation Fund.  

Direct investments take centre stage 

Another key focus in the next few years for KIC is the ramp-up of direct investment activities within its $45 billion alternatives portfolio. This will be across all private market asset classes: private equity, real estate, infrastructure and private debt. 

KIC will leverage its five overseas offices and establish strategic partnerships with global asset managers, the fund spokesperson said. Three of those international offshoots are entirely dedicated to private assets investments: the San Francisco office homes in on private equity and venture capital due to its proximity to the Silicon Valley, while the Singapore and Mumbai units offer on the ground insights to real assets and private equity deals in emerging markets.  

The alternatives bucket has delivered an annualised return of 7.7 per cent between its inception in 2009 and the end of 2024, according to KIC’s latest annual report. Private equity was the bundle’s top performer with a 9.4 annualised return, where KIC began direct investment in 2010 and co-investments with GPs in 2011. 

Private debt was carved out as a standalone asset class in 2024 and the roughly $4 billion portfolio is still at an early stage of construction. The fund is looking to expand into areas like direct corporate lending and is seeking co-investment opportunities alongside asset managers. It acquired a minority stake in US direct lending and credit asset manager Golub Capital in 2022 to secure stable cash flows via loans to blue chip companies. 

In real assets, KIC is exploring emerging markets and niche sector infrastructure opportunities on top of those in mature markets including North America and Europe, focusing on residential real estate, logistics and data centres.