BLI picks overseas custodian, mulls external manager

Taiwan's Bureau of Labour Insurance picks BNY Mellon for a $1 billion custody and admin mandate, and may add an external manager for its growing overseas investments.
BLI picks overseas custodian, mulls external manager

Taiwan’s Bureau of Labour Insurance (BLI) has chosen BNY Mellon to provide custody and admin for its National Pension Insurance Fund, but has yet to decide whether to turn to external managers for its growing overseas investments.

BLI issued a request for proposal for the $1 billion custody mandate back in February – the first time it has done so for NPIF to meet its overseas asset allocation needs.

The five-year contract will see BNY Mellon provide global custody, fund accounting, performance and risk analytics and compliance services for the fund. It was the only custodian bank selected, and the contract is renewable after expiration.

While the scope of this contract includes custodian services for NPIF’s mandated investments and self investment, at present NPIF does not employ an external manager for its overseas investments, and has not decided whether such mandates will be issued in the near future.

The bureau previously told AsianInvestor that it plans to expand NPIF’s overseas investment plans, but the responsible officer has so far declined to disclose any details.

The NPIF had NT$113.3 billion ($3.8 billion) in assets under management as at May 31 this year, of which overseas investments accounted for NT$23.5 billion (just under 21%) and the rest in domestic assets.

Of this overseas exposure, debt securities accounted for NT$22.2 billion with the remainder made up of cash or cash equivalents. As yet the fund has no overseas equities exposure.

Leow Chong-Jin, head of Asia at BNY Mellon Asset Servicing, notes that the island’s funds industry is becoming increasingly globalised, with rising demand for global custody as asset management houses diversify their portfolios overseas.

James Liu, country executive for BNY Mellon in Taiwan, says pension funds have been evolving from equity-centric asset allocation to “diversifying and seeking opportunities internationally, particularly in respect of equities, but also increasingly alternatives and emerging markets”.

The NPIF is one of two pension funds under the bureau’s umbrella, the other being the Labour Insurance Fund (LIF), by far the larger of the two at NT$503 billion ($16.7 billion) at the end of May. Its overseas investments had reached NT$198.5 billion, or 39.4% of its overall portfolio.

JP Morgan is LIF’s overseas custodian. Its mandate is set to expire this year but is very likely to be renewed this September, according to one BLI insider.

BLI issued a global emerging markets debt mandate for LIF on June 29 and will select three external managers to run a total of $450 million ($150 million each) for five years within segregated portfolios.

Whether NPIF will follow suit remains unclear for now.

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