Asia’s top asset owners: Why NZ Super and Cathay Life stand tall
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 the explanations of the winners of our proficiency awards, we reveal why New Zealand Super so impressed for its investment capabilities, and how Cathay Life has become a regional leader for its commitment to environmental, social and governance investment standards.
INVESTMENT PRINCIPLES
New Zealand Super
As one of the more sophisticated investors in Asia Pacific, New Zealand Super (NZ Super) has its investment resources well established. It invests across a huge swathe of asset types, that move from active collateral, infrastructure, securities lending, strategic tilting, US transition assets and volatility strategies, to name a few of its less mainstream approaches.
The asset owner has deliberately been winnowing its stable of fund manager partners in recent years as it seeks deeper partnerships with a more select set of fund houses. At the same time it has expanded its team of direct investment professionals, to better execute on its investment hub plan. Its staff number rose from 112 in 2016 to 141 this year.
This concept involves NZ Super creating direct investing opportunities in New Zealand that wouldn’t otherwise see the light of day.
Essentially the fund believes its home country has some value gaps in unlisted or illiquid assets that it can take advantage of, along with an ability to acquire, rationalise and create economic of scale from sets of local assets. And it needs some more professionals to do it.
Meanwhile, NZ Super demonstrated the strength of its bench when former and 10-year employee CIO Matt Whineray was tapped in July 2018 to become the new CEO, after Adrian Orr left to become the governor of Bank of New Zealand in December 2017.
Whineray’s appointment was not a shoo-in; it followed a six month international search process. Stephen Gilmore was subsequently hired from Future Fund of Australia to fill the now-vacant CIO position.
The ability of the sovereign wealth fund to keep posting strong returns, amid volatile markets in the months since, point to the resilience of this new-look investment leadership. NZ Super continues to try and improve its staff too, encouraging secondments to managers and peers, while this year it initiated a new development process this year that gives each team member a channel to express their career ambitions.
ESG
Cathay Life
Taiwan has generally aimed to improve its commitments to environmental, social and governance (ESG) principles, and Cathay Life has been a particularly active supporter of these goals.
This is not a new commitment. The insurer became the first insurer to endorse the Taiwan Stewardship Principles for Institutional Investors in 2016, and in the same year it set up a responsible investment working group in 2016, again a first for a local insurer.
This group covers all major asset classes, and its leader is tasked with setting short, medium and long term goals and implementation plans each year It has set itself short, medium and long-term goals to fulfil its responsibilities as an asset owner. The group had 40 members as of the end of 2018, two of which are dedicated responsible investment officers.
Cathay Life has set itself short, medium and long-term goals to fulfil its responsibilities as an asset owner
The insurer has also established ESG watchlists to keep an eye on investment targets that have potential risks, as well as integrating risks into general investment decisions. These can lead it to pause investing or go underweight if it becomes concerned about the risks the investment poses.
Cathay Life has also undertaken a thorough review of 129 listed equity assets using ESG procedures, and it began doing so with non-corporate and corporate bond investment targets this year. It also looks to see whether asset manager partners have signed up to the Principles for Responsible Investment (PRI) when evaluating them. At the end of 2018, 98% of its mandated assets were managed by PRI signatories, versus 3% in 2017.
Cathay Life’s efforts don’t just extend to itself. It is educating companies about ESG, urging local firms to improve their non-financial ESG performance and information, while regularly visiting companies.
It made 2,214 visits to investee businesses during 2018. Plus the insurer co-organised a climate Change Forum with its parent company in 2017 and 2018, to try and raise attention to the risks and possible opportunities raised by the climate crisis.
Add into this investments into low carbon and green energy (NT$125 billion as of 2018), and Cathay Life has established itself as one of Asia’s most serious advocates for ESG.