Australian $100 billion pension fund says active in Japan, neutral on China

By Lewis Jackson and Praveen Menon

SYDNEY (Reuters) – Australia’s third largest pension fund will stay active in Japanese markets in the coming months and is neutral about China despite growing investor aversion to the country’s markets, a senior executive said on Tuesday.

The A$160 billion ($104 billion) Aware Super made “good money” recently due to an overweight position in Japanese equities, Head of Investment Strategy Michael Winchester said in an interview with Reuters.

“Japan has been such an incredible story,” said Winchester.

“[Tactically] I think we’ll be very active. We don’t currently have a position on, but it’s a market which is moving. It’s been historically pretty cheap. It screened pretty attractive for us to have a small overweight position… I expect we’ll be reengaging with that market over the coming months.”

Aware Super’s allocation to Japanese stocks via its equity investment managers is currently “about market weight,” Winchester added.

Japan is Asia’s best performing stock market this year thanks to a mix of cheap valuations, corporate reforms, outflows from China, low rates and, not least, optimism from billionaire U.S. investor Warren Buffet.

Projected to grow to A$250 billion by 2026, Aware Super is among the homegrown pension giants outgrowing Australia and increasingly looking overseas to deploy capital. Aware is on track to open its first office in London later this year, Winchester said.

As global investors concerned about faltering post-COVID growth and Sino-U.S. tensions increasingly bypass Chinese markets, Winchester said Aware remained broadly neutral about a country that was a large part of the global growth story.

“We don’t have a top-down view that we should be overweight or underweight China at the moment… We’re happy to let our investment managers buy attractively priced Chinese companies with good prospects,” he said.

Aware Super’s exposure to China-listed equities fell from around A$420 million to near the A$230 million mark over the final six months of 2022 according to portfolio disclosures reviewed by Reuters.

($1 = 1.5316 Australian dollars)

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