According to Nazaiful, KWAP had also made a conscious effort to study different portfolios, which was actually influenced by the New Zealand Super Energy Fund as well as the Canada approach before developing their own risk appetite framework. — AZHAR MAHFOF/The Star
KUALA LUMPUR: The Kumpulan Wang Persaraan (Diperbadankan) [KWAP] is positioning itself as a key voice in global pension reform which it has highlighted the importance of financial sustainability and readiness for demographic and economic transitions in the years ahead.
KWAP chief strategy and services officer Nazaiful Affendi Zainal Abidin said that while KWAP’s 18-year history is relatively young compared with its global peers, it already has a strong focus on disciplined contributions and robust investment strategies placed.
“We are liability-aware rather than liability-driven, and this gives us more room to be agile in managing risks,” he said during a the World Social Security Forum (WSSF) 2025 panel session titled, “Ensuring financially sustainable social security systems in a world in transition.”
KWAP’s fund growth, Nazaiful further elaborated, is anchored by contributions from the government and statutory bodies of up to 17.5%, with no compulsion to return dividends to the government, though it remains able to support the government through other contributions when called upon.
This arrangement has enabled the fund to prioritise long-term sustainability and strengthen its role as a strategic partner to policymakers.
On investments, Nazaiful highlighted a shift towards private markets with the target set at about 30% of the portfolio.
“We consciously raised our risk ceiling from a 60:40 risk allocation to an 80:20 ceiling to reflect our ability to take on more risk. By taking on additional illiquidity premium, we are better able to sustain returns.
“And I think what we did back in 2020 was to look at our portfolio in general and look at how robust is our investment from a risk return standpoint,” he added.
Nazaiful said KWAP had also made a conscious effort to study different portfolios, which was actually influenced by the New Zealand Super Energy Fund as well as the Canada approach before developing their own risk appetite framework.
The framework, he explained, allowed the fund to manage the portfolio within a risk floor and a risk ceiling.
“Defining it appropriately will allow us to determine how we look at our strategy asset allocation, which actually is the important part of ensuring sustainability,” he said.
Beyond financial resilience, Nazaiful also said that KWAP is preparing for demographic and environmental shifts.
He said studies have been conducted on pensioners’ behaviour that provided insights into retirement patterns, guiding investment into sectors such as the silver economy, healthcare, education and advanced manufacturing.
“Innovation for us means going beyond returns. We are looking at impact investing strategies that balance financial outcomes with social value,” he said.
This is further addressed by Yurim Han, a manager at South Korea’s National Pension Services, stating that to ensure a sustainable social security system, it will likely require not only timely action, but also a combination of different reform methods.
She said there were also issues related to pension reform followed the last actuarial calculation in 2018; however, an agreement on the alternatives could not be achieved at the time. Five years have since passed.
“If we miss the right moment, we might have to make even more difficult changes next time to ensure sustainability.
“Therefore, after considering various alternatives and going through multiple rounds of public consultation and discussions, we have reached a difficult but important agreement and made the recent reform.
“The factors mentioned earlier, contribution rate, income replacement rate, eligibility age and investment returns are all crucial and it is necessary to properly adjust and balance them,” she said.
Nazaiful stressed that sustainability remains central within the social security protection model, with KWAP committed to transitioning its portfolio towards net zero.
“Reforms often involve tough trade-offs and difficult policy choices, but inaction is not an option. The way forward lies in building consensus through active engagement, clear communication and strong advocacy,” he said.
Meanwhile, International Commission on Occupational Health (ICOH) president Professor Dr Seong-Kyu Kang said social security implementation depends on a nation’s economy and social consensus.
“Sharing experiences helps countries that are struggling learn and adopt effective systems,” he said.
Oman’s Social Protection Fund chief executive officer Dr Faisal Abdullah Al Farsi said that by bringing all countries together is vital to collectively shape social security globally.
“It provides a great opportunity to find joint solutions for future challenges,” he added.
