The past few years have amply demonstrated why the world’s most successful asset owners combine process discipline with hard work, talented personnel and a willingness to embrace new opportunities.
Some of this year’s winners demonstrated global standards of sophistication and knowhow, while others have been expanding their capabilities amid increasingly unpredictable market conditions.
It was not easy to pick the winners. In addition to gaining self-nominations, we sought out the advice of some of the most talented and experienced advisers and consultants in the markets. And we invited a small panel of judges to volunteer their expertise and knowledge to assess applicants, and suggest their own. That still led to some highly competitive categories, in which we had to choose between impressive organisations.
These awards are a testament to the dedication with which the region’s best institutions take the management of their assets. As the world increasingly traverses a period of political uncertainty and inferior fixed rate returns, the need for investors to be nimble and open to new ideas will continue to mount.
Continuing our market category awards, we explain why the Public Officials Benefit Association of South Korea and Singapore's GIC stood out for their investment efforts in their respective areas of consideration.
Public Officials Benefit Association
While it’s not one of Korea’s biggest echelon of pension fund players, Poba has been one of the most dynamic under its CIO, Jang Dong-hun.
For a start, it’s been a strong investor. An increased emphasis on private asset investing has stood Poba in good stead, particularly during the difficult late months of 2018. While the market drops of that period led almost all leading Korean pension funds to record losses for the calendar year, Poba made an annual investment return of 4.7%.
To remain active, the W13.56 trillion ($11.35 billion) fund constantly seeks out new investment ideas to help supplement its growing investment portfolio, courtesy of a steady inflow of pension savings. That led it to expand into new asset areas such as distressed assets and fund of hedge fund investments.
In addition, Jang has directed Poba to expand its capabilities as an international investor in private assets by partnering with other experienced institutional investors to form project-based joint ventures to invest in high quality private assets. It’s already had several successes.
In 2018 it partnered with the California State Teachers Retirement System for a $400 million real estate debt fund, and a few months later it created a US property-focused debt fund with Teacher Retirement System of Texas.
Most recently, in October, Poba signed a memorandum of understanding with PFA, Denmark’s largest commercial pension fund, to launch a joint fund worth about W900 billion to invest in European real estate. It announced the first signing on Friday (December 6).
Those alliances are examples of ways in which Poba seeks to build a level of investment capability that extends well beyond its relatively small size. And it’s likely to continue influencing the actions of many of its larger, yet more ponderous, pension peers.
Widely seen as the most sophisticated investor in Southeast Asia, and one of the top asset owners across the entire region, GIC seems to make headlines on an almost weekly process for the new deals and investments it is striking.
The sovereign investment fund has long been a big investor in private assets (19% of its portfolio is in real estate and private equity), and it continued this focus on identifying new investments throughout 2018 and into this year. In October it bought a Parisian office tower for €530 billion ($586.96 billion) and it joined a consortium to co-invest PHP5.2 billion ($100 million) in Metro Pacific Hospitals, a Philippines hospital and healthcare fund.
Other notable investments include GIC buying 10% of Terminal Investment Corporation, the world’s sixth-largest terminal operator, in May while in January 2019 it teamed up with Japanese bank Mizuho to acquire a stake in Vietnamese lender Vietcombank. It’s hard to spot another Asian asset owner with GIC’s appetite for variety.
This willingness to diversify on a global stage is evident in the geographic exposure of GIC’s portfolio. Almost one-third (32%) of its portfolio was invested in US assets, as of the end of its last fiscal year (March 31), other 18% was in the UK and the eurozone and 12% sat in Japan.
The fund’s approach has ensured a continual level of return above inflation rates. GIC doesn’t announce its annual investment figures, but noted that for the 20 year period to March 31, 2019 its annualised return of 3.4% over global inflation. In a tough year for asset owners, that was no bad achievement.
GIC also made a few notable shifts to its portfolio as of March, raising its bonds and cash exposure by two percentage points to 39%, increasing private equity to 12% and cutting developed market equities from 23% to 19%. As it said at the time, the fund has a cautious view of the investment climate and global environment.
When an investor like this one tells you to be careful, it’s wise to listen.
While it is not Taiwan’s top insurer by size, Fubon Life has gone out of its way in recent years to improve its portfolio diversity.
This has included major investments into alternative assets, as part of a build-up of a major overseas allocation (around 64% of investable assets, as of end 2018). That helped it hit an investment return of 3.62% on its NT$3.62 trillion ($118.7 billion) of assets in 2018; not bad given Taiwan’s virtually flat interest rates and the difficult markets of late last year.
It’s been especially busy in private equity. In 2019 alone it invested in investments funds of Warburg Pincus and Blackstone (investing $50 million apiece into two of the latter’s funds), $45 million in NB Alternatives’ fourth co-investment vehicle in June, and €40 million in Permira’s seventh global private equity opportunities fund in July.
It’s also been active in infrastructure and property. In the former it ploughed $100 million into a fund from Morgan Stanley Infrastructure Partners early this year and another $200 million in Global Infrastructure Partners IV in June, alongside Cathay Life and Taiwan Life. Meanwhile, in December 2018 it bought the EuroTower office building in Frankfurt for €575 million, its fifth European building acquisition.
Despite this array of investments, Fubon Life doesn’t have an inexhaustible appetite for international assets. The company said in August it could reweigh into local assets if US rates kept rising. While there have been no hikes in the months since, Fubon Life appears to be weighing local possibilities.
These exist in part because the Taiwanese government wants to reduce usage of fossil fuels and nuclear power, plus encourage investment into its so-called five plus two innovative industries. Fubon Life and three of its life insurer peers committed to invest NT$5.6 billion in six solar projects
in 2018 and it allocated NT$400 million to the Taishan Waterloo Fund, a national investment corporation that targets the island’s favoured industries.
Meanwhile, it is taking its ESG investing seriously too, and has for example conducted ESG inspection of all its bond investment portfolio, as well as checking all new equity investments for their ESG compatibility. Nobody can say Fubon Life isn’t doing its bit as a responsible national champion as well as international acquirer.