Asset Allocation and Performance

This chapter discusses the asset and liability management of pension funds. Pension fund management requires investment diversification across asset classes across different short-and long-run time horizons. KWAP, one of Malaysia’s primary pension providers, has strategies for managing an optimal asset allocation to maximise the return. Within 13 years, from 2007 to 2020, KWAP managed to have a positive ROI throughout these years. This chapter further discusses Strategic and Tactical Asset Allocation and a few performance measurements such as the Sharpe Ratio, M2 risk-adjusted performance measurement and other concepts of Modern Portfolio Theory. As a policy implication, the KWAP should reduce allocation on fixed income and diversify into an international portfolio as Capital Market Line recommends. In addition, the money market seems surprisingly a safe asset allocation with the lower risk exposure.