HK Housing Authority issues RFP for multi-asset mandate

The $7.2 billion Hong Kong institution seeks a manager to run a portfolio of local equities and global fixed income.

The Hong Kong Housing Authority has issued a request for proposals (RFP) to fund management companies operating in the territory to pitch for a multi-asset mandate.

The size of the mandate was not announced in the HKHA’s criteria. The institution had $7.2 billion of assets as of 2009. The HKHA says its cash and investment balance over the next four years will be in the range of HK$59-62 billion; at present half is managed externally.

It is seeking a manager or set of managers to run a combined mandate of Hong Kong equities and global bonds. It is using the FTSE MPF Hong Kong Index and the Barclays Capital Global Aggregate Bond Index, hedged to US dollars, as its two benchmarks.

No performance targets were mentioned.

This is already perceived to be a broad mandate, say fund managers, but the HKHA is also allowing them to deviate from either benchmark by up to 20%. In other words, weightings of Hong Kong equities and global bonds can vary from 30% to 70%.

No derivatives will be allowed except to hedge back to HK dollars or US dollars “without incurring additional risk”, says the RFP. Nor will the HKHA allow the account to be leveraged or used for securities lending, borrowing or short-selling.

The organisation will allow up to 30% of the global bond NAV to be exposed to non-Hong Kong or US dollar currencies, after hedging, as long as they belong to countries with a long-term local currency credit rating of A- or better. Instruments can be up to 30 years’ maturity, or 10.5 years for those rated BBB+ or triple-B; the minimum rating is BBB/Baa2. The total exposure to triple-B type bonds mustn’t exceed 6.5% of the global bond NAV.

Fund managers’ proposals are due on November 5 and will be passed on to the Housing Authority’s external asset consultant, with a ‘don’t call us, we’ll call you’ proviso.

The housing authority, established in 1973, develops and implements a public housing programme to help low-income families in Hong Kong.

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