China’s social security fund has signed a partnership deal with software provider eFront to manage its alternative investments more efficiently.
The National Council for Social Security Fund, which manages the nation’s Rmb850 billion ($135 billion) social security fund, selected eFront to provide automated support for its alternative investments.
Tarek Chouman, managing director for Asia and the Middle East at eFront, notes that its service will enable the NCSSF to screen funds it is considering investing into.
“The system supports the process in terms of seeking supporting material and getting hold of the right data from general partners,” he tells AsianInvestor.
“Once it has the data the NCSSF can build score cards and find out the potential value of the funds it might want to invest into.
“The NCSSF needs a system which can help it constantly to develop a big picture of where it is going,” adds Chouman. “What is my exposure in terms of geography and sectors? What is my risk? What are my cashflow issues?”
It is the first time to his knowledge that the NCSSF has adopted such a system to assist its alternative investments, which he believes will be used for both overseas and domestic investments.
He notes China’s domestic private equity market is expanding rapidly and as such suggests that eFront’s technology tools will become increasingly important.
“With alternative investments growing significantly, the demand for automating business workflows in NCSSF’s alternative investments is increasing,” he says.
The NCSSF accelerated its private equity exposure in 2011. At present it has invested a total of Rmb20 billion into 13 PE funds, including Rmb7 billion into five funds last year.
Managers of the five latest funds include Citic Capital, GP Capital Industrial PE Fund, China Broadband Capital, Legend Capital and CDH Investment.
But Shanghai-based consultancy Z-Ben Advisors notes that the NCSSF is allowed to invest up to 10% of its overall AUM into the PE industry – which equates to Rmb85 billion.
“As a result we suspect that NCSSF’s private equity investments will increase rapidly in 2012,” concludes Z-Ben.
At present eFront has 12 full-time consultants in its Beijing office to help local clients with implementation. Chouman says it is preparing to open an office in Shanghai towards the end of this year and plans another in Shenzhen in 2013.
He adds the firm is well established in the sovereign wealth fund arena, counting the Abu Dhabi Investment Authority and Singapore’s Government Investment Corporation among its clients.
It also interacts with such institutions in China including China Investment Corporation and the State Administration of Foreign Exchange.
“We believe by the end of the year we should be able to announce another major signature in this area,” suggests Chouman.
“What Asian sovereign wealth fund clients expect now is a system which can empower the users. The time when IT staff [simply] offer support to end-users is already behind us.”
Founded in 1999, eFront has 300 customers in 38 countries and serves clients from offices in Asia, Europe, the Middle East and North America.
The NCSSF is a government agency under the State Council. According to its annual report, the fund’s AUM will almost double to Rmb1.5 trillion by 2015.