SWF success story
What do China Investment Corporation and Singapore’s GIC have in common? No prizes for the fact they’re sovereign wealth funds tasked with diversifying foreign reserves. More pertinently, in 2008 they both published their first public reports setting out returns, management structure and governance. But that may be about where the similarities end.
CIC was set up the year before, in September 2007, while GIC was established 26 years earlier, in 1981. This gulf in experience is evident through their allocation approaches. Within two years of inception CIC had put $150 billion to work, taking a number of direct bets to capitalise on distressed assets amid the debris of the financial crisis. GIC, by contrast, started as it meant to carry on, mapping out a conservative, long-term strategic plan. Admittedly, GIC enjoyed a three-year incubation period with support from the Monetary Authority of Singapore, but it has only launched two major reviews of its investment approach since. CIC has revamped its strategic asset allocation approach regularly. Entrepreneurial zeal flourishes at CIC at the expense of an institutionalised investment process.
To some extent CIC’s growing pains are understandable. A sound reference point is Korea Investment Corporation. Set up in 2006, KIC was heavily criticised over losses from its $2 billion investment in Merrill Lynch in January 2008, at that time 10% of its total AUM. Chief investment officer Choo Heung-sik launched an impassioned defence of KIC at AsianInvestor’s Korea Investment Forum in Seoul this June. “It is something that can easily happen to a new organisation,” he argued (see our July 2014 edition).
CIC management has recognised the need to restructure. Under CIO Li Keping, it set a new trajectory to curtail direct investments and take a more balanced approach in line with a US endowment fund (see page 16). CIC could do no better than to take its lead from GIC, which has a long-term reference portfolio – taking the risk of short-term underperformance – and sought to eliminate overlapping risk factors in its policy portfolio by focusing on six asset classes. It is motivated by trying to understand the nature of return drivers.
The sophistication of its risk management and investment process, combined with its deep resources of talent and lenghthy staff tenures, persuaded AsianInvestor to recognise GIC in two categories for our inaugural Institutional Excellence awards, with decisions based on editorial discretion. Many congratulations to GIC and all of our 10 other winners (see page 23). They are setting best-practice benchmarks for the region’s institutions to follow. To celebrate we are hosting a VIP dinner at the Westin Hotel in Singapore on December 3. For winners and sponsors, it should be a night to remember.
On the move
04 BlackRock names quartet of business heads; UBS Global AM building out multi-asset team; Desmond Ng quits Invesco for AllianzGI
07 Hong Kong focus: Does the city realise the strength of its own position in Beijing’s drive to internationalise?
10 Regulatory Analysis: Still seeking clarity on Stock Connect
12 Regulatory Roundup: Singapore Fair proposals to be made law; Iosco proposes principles for custodians
14 Data Centre: Growing Chinese wealth
16 Li’s vision for CIC
The chief investment officer must overcome structural obstacles if he is to successfully reposition sovereign fund CIC
20 Q&A: Larry Wan, CIO of Zhongrong Life Insurance
22 NPS to boost investment team; CIC head takes reins at CICC; Chinese HNWIs ‘overconfident’
24 Distributors raise passport doubts
Consumer banks across Singapore, Malaysia and Thailand express concerns over investor demand for the Asean fund passport scheme
28 Q&A: Rosita Lee, Hang Seng Bank
30 iFast plans IPO, regional expansion; BNY Mellon, Morgan Stanley on wealth buildouts
32 When equity managers think like bond managers
Managers of US equity portfolios, usually an optimistic lot, have become more cautious than peers on the fixed-income side
34 Will US interest rates rising mean the end of a 35-year bond rally?
38 Slow start for RQFII scheme in London
40 Can certain exchange-traded funds deliver on their promise of liquidity in the event of another financial crisis?
44 What Bill Gross’s exit means for Pimco; Asia fund firms seen lagging on cyber-security
48 Alternatives for all?
Retail-friendly, liquid alternative investments are sparking interest in Asia. But could they do the industry more harm than good?
50 Q&A: Takajiro Ishikawa, MC Asset Management
52 AMP, BlackRock make infrastructure moves; optimism rises on QDLP
54 Calculating the value of outsourcing
The question of whether to outsource middle-office functions to a third party is vexing hedge fund managers.
56 Operations manager: Brian Pohli, CQS
58 MSCI sounds Saudi warning; HK tipped for A-share index futures
59 Trader talk: Teerapong Sawejtraporn, Kasikorn Asset Management
62 Asia’s Independent Research Summit
Experts debated the direction of the US Federal Reserve and economic theory, while China’s
dream and the effects of technology also figured at the event last month.
64 Bookend: The Innovators: How a group of hackers, geniuses and geeks created the digital revolution, by Walter Isaacson