Taiwan to award $1.5 billion in pension fund mandates
TaiwanÆs pension system is speeding up its global investments and outsourcing process. In order to qualify for the current mandates, bidders must have a local presence.
TaiwanÆs Labour Pension Fund says it is soliciting bids for $1.5 billion worth of overseas investment mandates. The fundÆs supervisory committee expects to select six managers from the latest round of bidding. Each manager will receive $250 million from the fund to invest in a global equities or a global fixed-income portfolio.
The committee says it will evaluate the biddersÆ performance over the past three years against the MSCI World Index and the FTSE All World Index in the equities category. For the fixed-income portfolio, managers are expected to show proof of superior performance against the benchmark Lehman Brothers Global Aggregate Bond Index or the Citigroup World Broad Investment Grade Index.
Requirements include a minimum three-year history and $5 billion in assets under management for the fund management companies.
Foreign managers with no prior history in Taiwan need not apply. Reinforcing a rising trend among Asian investors to demand better on-ground service, the Labour Pension Fund -- one of the country's four public pension funds -- states that managers must show an existing branch, operation venue or service team within the country.
Interested managers are invited to submit proposals in GIPS-compliant or Association for Investment Management Performance Presentation Standards (AIMR-PPS) formats by March 12, 2008. The mandates will be renewed every four years subject to the committeeÆs performance review.
Meanwhile, the fund is also holding a separate tender for an overseas custodian. The five-year mandate will be awarded to a candidate with over $500 billion in assets under custody and experience in transition management and securities lending. Custodians with less than $500 billion can align with a custodian organisation that meets the fundÆs conditions to bid in the tender. The tender will close on Thursday, March 18.
Michael Chen, an official at the Labour Pension Fund in Taipei, says the announcements are unrelated to current global market conditions and are a part of a longer-term strategy for public pensions in Taiwan. The fund will be increasingly active in outsourcing and diversifying its investments. However, Chen declines to comment in detail on the committeeÆs selection criteria in assessing managerÆs performances and fees expectation.
In 2005, the Labour Pension Fund underwent vigorous reforms, which transformed the islandÆs pension system from a defined benefit model to a defined contribution system. The reforms are also credited to have removed an ailing pension model that required employees to provide 25 consecutive years of service before they could be qualified for retirement benefits.
Industry observers say the latest move signals an increasing willingness to change in the public pension system, after years of stagnated growth since the reform went into effect in 2005. A source familiar with the fundÆs operations says the majority of the assets are still held in cash, yielding just 2.61% in fixed deposits as of the latest quarter.
Chen says more assets will be outsourced in 2008, after the $1.5 billion mandate in the current round of tender, and that domestic equities will be a key focus.
As of December 2007, the Labour Pension Fund had $14.65 billion in assets under management. Last year, its return on investments was 5.39% or $740.98 million. The fund committee that oversees the current tender is made up of local scholars, labour union leaders, small-medium enterprises association representatives, and officials from TaiwanÆs Ministry of Finance and Financial Supervisory Bureau.
Outsourced overseas investment was at 5.62% as at December 2007. Last June, the Labour Pension Fund outsourced $800 million to four fund houses, including Invesco (returning -0.49%), UBS Global Asset Management (+1.64%), Fidelity (+7.39%) and Allianz Global Investors (+0.66%). The investments delivered a 2.3% return last year in 2007.
(For more on the latest status of TaiwanÆs pension investments, please see the March issue of AsianInvestor.)
The committee says it will evaluate the biddersÆ performance over the past three years against the MSCI World Index and the FTSE All World Index in the equities category. For the fixed-income portfolio, managers are expected to show proof of superior performance against the benchmark Lehman Brothers Global Aggregate Bond Index or the Citigroup World Broad Investment Grade Index.
Requirements include a minimum three-year history and $5 billion in assets under management for the fund management companies.
Foreign managers with no prior history in Taiwan need not apply. Reinforcing a rising trend among Asian investors to demand better on-ground service, the Labour Pension Fund -- one of the country's four public pension funds -- states that managers must show an existing branch, operation venue or service team within the country.
Interested managers are invited to submit proposals in GIPS-compliant or Association for Investment Management Performance Presentation Standards (AIMR-PPS) formats by March 12, 2008. The mandates will be renewed every four years subject to the committeeÆs performance review.
Meanwhile, the fund is also holding a separate tender for an overseas custodian. The five-year mandate will be awarded to a candidate with over $500 billion in assets under custody and experience in transition management and securities lending. Custodians with less than $500 billion can align with a custodian organisation that meets the fundÆs conditions to bid in the tender. The tender will close on Thursday, March 18.
Michael Chen, an official at the Labour Pension Fund in Taipei, says the announcements are unrelated to current global market conditions and are a part of a longer-term strategy for public pensions in Taiwan. The fund will be increasingly active in outsourcing and diversifying its investments. However, Chen declines to comment in detail on the committeeÆs selection criteria in assessing managerÆs performances and fees expectation.
In 2005, the Labour Pension Fund underwent vigorous reforms, which transformed the islandÆs pension system from a defined benefit model to a defined contribution system. The reforms are also credited to have removed an ailing pension model that required employees to provide 25 consecutive years of service before they could be qualified for retirement benefits.
Industry observers say the latest move signals an increasing willingness to change in the public pension system, after years of stagnated growth since the reform went into effect in 2005. A source familiar with the fundÆs operations says the majority of the assets are still held in cash, yielding just 2.61% in fixed deposits as of the latest quarter.
Chen says more assets will be outsourced in 2008, after the $1.5 billion mandate in the current round of tender, and that domestic equities will be a key focus.
As of December 2007, the Labour Pension Fund had $14.65 billion in assets under management. Last year, its return on investments was 5.39% or $740.98 million. The fund committee that oversees the current tender is made up of local scholars, labour union leaders, small-medium enterprises association representatives, and officials from TaiwanÆs Ministry of Finance and Financial Supervisory Bureau.
Outsourced overseas investment was at 5.62% as at December 2007. Last June, the Labour Pension Fund outsourced $800 million to four fund houses, including Invesco (returning -0.49%), UBS Global Asset Management (+1.64%), Fidelity (+7.39%) and Allianz Global Investors (+0.66%). The investments delivered a 2.3% return last year in 2007.
(For more on the latest status of TaiwanÆs pension investments, please see the March issue of AsianInvestor.)
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