Bureau of Labor Funds shows integration skills
AsianInvestor’s second annual Institutional Excellence Awards were introduced to highlight best practice, with awards handed out in 17 categories.
Taiwan's Bureau of Labor Funds demonstrated strong leadership and best practice in its integration of five public funds and its moves into new asset classes to be named public pension fund of the year.
The winners were announced on October 30 and received their awards at an exclusive ceremony and dinner on December at The South Beach hotel in Singapore.
We thank all those who contributed their thoughts to these awards. The full list of write-ups appears in the December issue of AsianInvestor magazine, and more details of our decision-making process can be found here.
Public Pension Fund
Bureau of Labor Funds
The way Taiwan's Bureau of Labor Funds (BLF) has managed the integration of five public-sector pension funds so smoothly while continuing to outsource to numerous asset classes is worthy of note.
BLF’s intelligent approach to passive vehicles and alternative investments over the past three years has marked it out as a leader in Asia. It initiated exposure to alternative indices in 2011 as part of its overseas allocation, then applied the concept to global equity mandates, expanding to sovereign fixed income last year. Such investments account for 32% of its $19 billion in external mandates, with plans to outsource $2.1 billion in Asia-Pacific equity index mandates in 2016. It has $6.2 billion invested in smart beta, or 7% of its $89 billion in AUM.
The challenge for BLF is to achieve consistent performance in a low-rate environment. By hiring external managers it leverages knowledge from global players, while the application of passive vehicles helps it to reduce costs.
BLF is breaking ground. It was the first insurer in Taiwan to invest in global real estate investment trusts and listed infrastructure securities, and plans to issue $3.2 billion in multi-asset mandates next year, categorised under alternatives.
Clarity of decision-making is helping BLF and the funds it oversees to meet their challenges, particularly given that it has seen 45% asset growth in three years.
One of the funds it manages – the $65 billion Labor Pension Fund (LPF) – ventured into alternatives in 2011, gaining exposure to commodities, energy, direct real estate funds and funds of hedge funds. LPF has achieved returns of 6.01% and 6.65% in 2013 and 2014, against a two-year fixed local bank deposit rate of 1.39% over the period.
Additionally, BLF improved operating efficiency, restructuring by integrating in-house capabilities among the funds and setting up an asset pool including ETFs, mutual funds, bonds and direct investments.
Due to the complexity of managing five schemes, BLF adopts a joint-mandate approach to boost efficiency and reduce costs in external fees. Its transparency is also impressive, disclosing updated information on its operations, asset allocation, securities holdings, performance and the external managers it hires.
BLF sets a leadership example of best practice for the industry to follow.
Winners previously unveiled:
Reserves manager: Monetary Authority of Singapore