SOKA-BAU is accelerating its retreat from China, citing persistent state interference in financial markets and a deteriorating environment for long-term institutional investment.
The organisation, which oversees pension funds in the German construction industry, said legal certainty and stability in China “is not conducive to investment success for institutional investors”. It added that political priorities increasingly outweigh investor interests.
China-focused fund strategies will run to term but will not be replaced, and the organisation has already reduced its exposure “as much as possible”. Assets will instead be redirected to Asia ex-China mandates, with ASEAN strategies cited as alternatives.
SOKA-BAU manages more than €14bn across two sub-funds and has carved out a dedicated Asia-Pacific portfolio. The goal is to increase the regional allocation to 35% of total assets from 12.7%, with weightings tied to GDP rather than market capitalisation.
By contrast, the pension fund said investments in the US continue in almost all asset classes, based on the country’s share of global GDP.
Balancing risks and opportunities
German pension funds continue to weigh geopolitical risk against long-term growth when investing in Asia. Allocations are rising, but institutions remain wary of shifting too far from the US despite tensions over trade.
KZVK, the €36bn pension fund for employees of the Catholic Church and charitable organisations, underweights China relative to both GDP and market capitalisation.
Yet earlier this year, it appointed Fullgoal Asset Management to run a Hong Kong-listed China equity mandate. It is also committing to a private equity fund targeting technology and healthcare in Japan and India as part of its long-term growth strategy.
KZVK already backs three funds managed by the same Asia specialist.
Nordrheinische Ärzteversorgung (NÄV), the €17bn pension fund for doctors in North Rhine-Westphalia, is also working with pan-Asiatic managers to reach an interim target of 15% of total assets invested in the region. It currently allocates 11% of assets to Asian and emerging market equities.
Alternatives on the rise
NÄV has increased its combined allocation to infrastructure, private equity and private debt to 28.4% of total assets, up from 27.3%, its latest statement has shown.
SOKA-BAU said it is also steadily increasing alternatives as it works toward its strategic allocation.
ZVK, its largest sub-fund with €12.6bn, aims to raise alternatives to 40% from the current 38.6%. The shift follows reforms to investment rules for Pensionskassen and Versorgungswerke, enabling greater exposure to infrastructure.
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