The Hong Kong Monetary Authority and Huang Chao-hsi, director general of Taiwan's Bureau of Labor Funds, have been honoured in AsianInvestor's Institutional Excellence Awards this year.
HKMA is the winner in the reserves management category, while Huang takes the prize for individual contribution to institutional investment. Read on for details of why they were selected.
BLF also received AsianInvestor's awards for Innovation and Pension Fund of the Year.
The awards were presented on Wednesday evening at an invite-only dinner at the Ritz Carlton Millennia Hotel in Singapore. They recognise both best practice and improving standards among asset owners across Asia Pacific.
AsianInvestor announced the 14 other winners by country, category and proficiency last month – among them the likes of insurance firm AIA, China's Ping An Life, Japan's Governent Pension Investment Fund, Korea's National Pension Service and Malaysia's Employees Provident Fund.
We will publish the write-ups for all the award recipients over the coming days, and they will appear in full in the December issue of AsianInvestor magazine.
Reserves management Institution:
Hong Kong Monetary Authority
Hong Kong Monetary Authority's Exchange Fund gains recognition this year for its willingness to explore new investment opportunities, particularly in alternative and renminbi assets.
The fund invests the reserves of HKMA and about HK$1 trillion ($128.9 billion) in government fiscal reserves. Central bank investment pools prioritise liquidity above all else, so the Exchange Fund mostly invests in high-grade bonds, with most of its assets held in foreign assets.
However, the fund’s investing team, headed by Francis Chu, actively seeks to generate better returns. Industry experts told AsianInvestor that HKMA has been an innovator over the past year, carefully considering how to best to diversify into new asset areas, and particularly investments linked to the renminbi. This has been key, as the Chinese currency entered the special drawing rights used by central banks this year as part of the mainland's accelerating capital markets liberalisation.
HKMA's approach appears to be paying off. While the institution doesn’t break down its investments by currency, its equity and bond allocations underpinned investment income of HK$86.8 billion for the first three quarters of 2016, or 2.4% of its HK$3.59 trillion in assets under management. That's much better than the HK$15.8 billion loss it booked last year due to foreign exchange volatility and Hong Kong's equity market slump.
The Exchange Fund is also diversifying its HK$139 billion long-term growth portfolio (LTGP), which invests in private equity and real estate. HKMA launched an Infrastructure Financing Facilitation Office in July, to promote the territory as an infrastructure financing hub. As part of this, the Exchange Fund is reviewing proposals for infrastructure investments, with an aim to close some in the coming months.
Vincent Lee, deputy director of the new office, told Bloomberg in October these showcase investments were designed to raise the Exchange Fund’s returns and help kick-start private funding into China’s ‘One Belt, One Road’ project initiative.
The LTGP has done an admirable job to date, averaging a 12% internal rate of return from 2008 to 2015. That’s evidently impressed the Hong Kong government, which on January 1 launched a new Future Fund that invests in alternatives assets. Fifty percent of its initial capital of HK$219.7 billion is being incrementally placed with the LTGP for investment – a clear vote of confidence.
Individual contribution to institutional investment:
Huang Chao-hsi, director general, Bureau of Labor Funds
The Bureau of Labor Funds (BLF) has seen its assets grow nearly 40% in the past three years, delivered benchmark-beating performances, further diversified its investment portfolios to an impressive degree and ensured successful integration of the various public pension funds under management. For this, it also received AsianInvestor's award for Pension Fund of the Year and Innovatio
The driving force behind these achievements has been director general Huang Chao-hsi.
Huang, former chairman of the Labor Pension Fund supervisory committee, took the helm of the amalgamated organisation, BLF, in February 2014. The veteran public servant pushed an integrated management model for the six funds under the bureau, which are managed all together by its five divisions, including domestic investment, foreign investment, risk management, finance management as well as the planning and audit division.
This management is proving effective. BLF’s assets under management rose 38% to $106 billion over the past three years to mid-2016, despite a challenging market environment. The proportion of foreign investment increased from 36.04% to 42.42% during that period, while the amount managed in-house grew from 33.62% to 43.31%.
BLF's funds reported a 6.15% return in 2014, -0.24% last year due to the global financial volatility and 3.49% in the first nine months of 2016.
Huang is seen as both down-to-earth and rigorous, and his willingness to innovate is clear from the various investment advances and outsourcing BLF has carried out in the past three years. He has also proven an effective thought leader, discussing his institution's insights and plans in forums and with the media.
After graduating from the Department of Economics at Tunghai University in Taichung, Taiwan, Huang first took a job as an associate at the Ministry of Finance. He has also worked as head of the finance bureau in Tainan city, director general of the department of financial analysis and chief secretary at Taiwan’s council for economic planning and development, and executive secretary of the country's National Development Fund.
Huang shifted to investment for social welfare in 2007 when he became the chairman of the Labor Pension Fund supervisory committee, which later became BLF.
Huang’s strategic vision, combined with his proven ability to develop the allocation habits of public entities, has marked BLF out as an exemplary institutional investor in Asia.