Wednesday, 20 Jan 2021 09:25 AM MYT
For some, the benefits are beginning to outweigh the political risks, and they are upping allocations to China, or considering doing so, according to Reuters’ interviews with half a dozen firms that advise and manage money for pension funds. China’s sovereign debt market is the world’s second-largest after the United States. Yet while foreigners own a third of the US Treasury market, they hold just 9.7 per cent of China’s sovereign debt, according to government data.
Investors also cite potential pitfalls such as less market transparency and liquidity, with some Japanese investors protesting China’s inclusion into FTSE Russell’s World Government Bond Index. “You have to explain if you invest in China. You don’t need to explain if you don’t invest. That’s how it is for the time being,” he said.Pension funds themselves are famously secretive about their investment allocation trends, and more than two dozen contacted by Reuters, mostly European, declined to comment on this.
Insight Investments is looking into setting up a Chinese bond fund on behalf of UK pension funds, Sabrina Jacobs, a fixed-income investment specialist at the US$1 trillion asset manager told Reuters. Insight currently holds around US$400 million of Chinese debt within its emerging market and global government bond funds.