Malaysia's Employees' Provident Fund (EPF) and insurer Cathay Life received AsianInvestor's Institutional Excellence Awards for their home markets (Southeast Asia and Taiwan, respectively). Here we outline why they were chosen.
AsianInvestor has already announced the full list of winners by country, category and proficiency, and published details of how we came to our final decisions. Scroll to the end of this article for links to the award write-ups we have already published.
All the details in full, along with photos of the winners, will appear in an extended feature in the December issue of AsianInvestor magazine.
The senior officials of Malaysia’s $160 billion public pension fund are a progressive lot.
To improve its views the Employees Provident Fund has added diversity in its board and investment panel, including members based on experience, skills, knowledge, industry backgrounds and ethnicity. It also added four women representatives onto the board over the past three years, while another sits on the investment panel.
It also established specific management committees to regulate its policies, manage internal discipline and ensure transparency.
EPF operates a rolling three-year return appraisal that is running at 4% in real terms. It reported $10 billion of gross income in its most recent reporting period, 13.18% higher than the previous year, due to diversification across asset classes, countries and currencies.
In 2016, EPF became the first retirement savings fund to offer sharia-compliant savings to members. The so-called Simpanan Shariah will be effective from January 2017, and at least 500,000 members have signed so far. It also embarked on ESG investing through its fixed income investment portfolio, while establishing its own ESG research team to cover domestic equities.
Since 2014 EPF has expanded its investment team to over 50 people, while reducing the amount of foreign stocks it manages externally from 100% three years ago to 40% today. It has also sought out property, private equity and infrastructure, raising such investments from 3.7% of AUM in 2013 to 5.7% this year.
The fund has purchased over 100 buildings, mostly via direct investments. It has also co-invested, such as when it partnered with Gaw Capital to develop logistics assets in China in June. EPF next plans to invest into natural resources.
Cathay Life stood out this year for making strides in internally cultivating talent and improving its corporate governance.
The insurer mostly invests in duration and stable income instruments, with 82% of its portfolio in fixed income, real estate, mortgages and policy loans. It’s successfully raised returns for its $154 billion in AUM by buying offshore and riskier assets.
As of September 30, Cathay Life had 52.5% of its overall portfolio in foreign bonds (up from 49% a year ago), which offered a pre-hedged yield of 5.9% for the first nine months of the year. It enhances investment returns through secured loans, build-operate-transfer (BOT) projects with stable cash flows, and alternative investments.
The insurer believes it needs internal investing capabilities to outperform, and expanded its internal investment team from 220 in 2015 to 300 this year. It also reorganised, setting up a “strategic investment section” for fixed-income investments and establishing a dealing department for securities and financial derivatives in April.
The insurer’s parent company Cathay Financial Holdings’ acquired US investment manager Conning in September 2015, and Cathay Life has since created an interdepartmental asset modeling committee to use Conning’s expertise in asset-liability-management technology. That includes developing projection models to consider future financial market scenarios and their potential impact on investments.
Cathay Life was also among the first signatories to the Taiwan Institutional Investor Stewardship Code (TIISC), which was launched by the Taiwan Stock Exchange in early August. It will have policies and mechanisms to follow the TIISC running by the beginning of 2017.
Write-ups already published (and what they were awarded for):