Insto roundup: Aussie regulator questions lifers; Korea pension CEOs’ mass exit
AUSTRALIA
The Australian Prudential Regulation Authority (Apra) released its look-back at 2019, making special mention of tough times for the life insurance industry and questioning its sustainability.
"Australia's life insurance sector faced deteriorating conditions over 2019," Apra said in its report Safeguarding Australia's Financial Wellbeing.The viability of some life insurance products, the regulator said, is in severe doubt due to risks and challenges hampering profitability.
However, despite the issues Apra noted that life insurers broadly finished 2019 financially resilient.
Source: Financial Standard
Cbus Super, the A$56.5 billion ($38.9 billion) building and construction industry superannuation fund, is looking for a new chief executive after announcing that David Atkin would depart mid-year after some 12 years at the helm.
The 56 year old Atkin said in a statement on January 14 that it was time for him to “explore other opportunities” after a period of “reflection with family over summer”.
Under his leadership, the fund has grown from $12 billion management to its current size. It was also a top performing superannuation fund over the last decade.
Source: Investment Magazine
Industry superannuation fund Hesta announced it had internally appointed Andrew Major to the newly created role of chief risk and compliance officer.
He was previously general manager for unlisted assets, managing the $53 billion fund’s investments in infrastructure, private equity, property and other alternative investment strategies.
“The appointment of Andrew to the executive team recognises the vital importance we place in risk management and compliance with all regulatory requirements, and the need to coordinate these across a diverse range of business activities,” said Debby Blakey, chief executive of Hesta.
Source: Super Review
Market Forces put UniSuper on the chopping block in a divestment campaign aimed at pressuring the fund to ditch shares in fossil fuel companies.
"UniSuper does not have fund-wide exclusions on fossil fuel investments of any kind. Instead, it claims to engage with investee companies in order to improve climate risk management," Market Forces said. "However, UniSuper has failed to vote in favour of a single climate change-related shareholder resolution in Australia, based on the fund's disclosed proxy votes to 30 June 2019."
UniSuper has released number of updates on its climate change policy, most recently in November of last year. Its Climate risk and our investments report outlined that the fund encourages the companies it is invested in to meet the expectations of the Paris Agreement.
Source: Financial Standard
CHINA
Allianz officially opened China’s first fully foreign-owned insurance holding company in Shanghai on January 16, following a series of measures recently announced by the Chinese government to further open up and encourage investment in China by foreign financial insurance institutions.
Sergio Balbinot and Solmaz Altin are the chairman and chief executive of Allianz China Insurance Holding Company, respectively.
Source: Allianz
The Asian Infrastructure Investment Bank (AIIB) plans to invest in digital infrastructure in its member countries to make up for what it sees as insufficient private capital going into this area.
Only 26% of Asia’s rural population has access to broadband and women are 10% less likely to own a mobile, with this gap rising to 28% in South Asia.
Beijing-based AIIB is calling for public consultations on its draft Digital Infrastructure Strategy.
Source: Modern Diplomacy
JAPAN
The Government Pension Investment Fund (GPIF) and the Inter-American Development Bank (IDB) have formed a partnership to promote and develop sustainable capital markets through a focus on Social Bonds, as well as the incorporation of ESG assessments in fixed income investments.
The collaboration integrates social aspects into fixed income investments to support IDB in improving lives in Latin America and the Caribbean. IDB's Social Bonds are issued in alignment with the Social Bond Principles, which are administered by the International Capital Market Association. These bonds provide investment opportunities for GPIF asset managers to contribute to make a sustainable society.
Source: GPIF
The yen’s drop is becoming a problem for Japan’s life insurers, some of the biggest investors in global bond markets.
The currency’s 1.4% slide against the dollar this year puts it at the weaker end of the range expected by some of Japan’s major insurers. The companies have tended to curb overseas investments when the yen weakens, and there are signs that’s happening again.
The investment strategies of Japan’s insurers are constantly under scrutiny given the clout they hold with about ¥380 trillion ($3.5 trillion) worth of assets. Negative bond yields at home have put them under increasing pressure in recent years, while rate-cuts globally have also depressed returns and spurred them into riskier assets.
Source: Bloomberg
KOREA
South Korean institutions, including pension funds and insurance companies, poured a record €12.5 billion ($14 billion) into Europe’s real estate assets in 2019, scooping up office buildings and logistics facilities which offer 2-3 percentage points more yields than domestic properties.
Their 2019 investment in Europe’s property market more than doubled from the previous year’s €5.4 billion, with France accounting for one-third with €4.5 billion ($5 billion), according to commercial real estate adviser Savills.
Source: Korean Investors
About halfway through their three-year terms, chief executives of the National Pension Service (NPS), Korean Teachers’ Credit Union and Public Officials Benefit Association stepped down this month to run in April’s general election.
Their simultaneous resignations occurred abruptly as the three major retirement funds in South Korea have yet to find their replacements, according to financial industry sources.
Source: Korean Investors
Financial groups have become increasingly cautious over legal risks associated with shareholders, after the National Pension Service (NPS), which serves as the groups' largest shareholder, pledged to take more aggressive action against damage to corporate value.
NPS's management committee stated on December 27 it would play a greater shareholder role, going as far as calling for board members' dismissal when the companies it invests in are suspected of engaging in practices that harm the company's value. A set of guidelines on shareholder activism were approved.
This has put the groups on edge ahead of general shareholders' meeting due to take place in March, as many of the financial groups currently face legal risks.
Source: Korea Times
Five companies are in the running to acquire Prudential Life Insurance of Korea, the South Korean arm of US-based Prudential Financial. The companies are Taiwan’s Fubon Financial Holdings and four domestic financial firms – KB Financial Group, MBK Partners, Hahn & Company, and IMM Private Equity
They all submitted letters of intent to Goldman Sachs, the lead manager for the sale, on January 16. Prudential Financial put its Korean life insurance operations up for sale in late 2019, as it seeks to trim down its overseas holdings, in anticipation of the new US accounting standard that will take effect in 2022.
Source: Korean Investors, Korea Times
Korean Reinsurance Company (Korean Re) announced the launch of its second branch in China. The reinsurer opened the new branch after receiving approval from China’s banking and insurance authorities in December.
The new office is the second location in China for the Korean firm, having set up operations in Beijing in 1997. Korean Re stated that the new branch would be in charge of sales, while the Beijing office will continue to lead the management and market research.
Korean Re has 11 overseas outlets in nine countries.
Source: Korea Herald, Korea Times, Life Insurance International
MALAYSIA
Malaysian state-owned fund manager Permodalan Nasional (PNB) revamped its leadership team in a personnel restructuring under new president and group chief executive Jalil Rasheed, former Southeast Asia CEO at US asset manager Invesco.
Hanizan Hood, who was chief investment officer before the position was split, is now PNB's CIO for public markets in the 16-member leadership team. Rick Ramli, previously deputy vice president for real estate, is the CIO for real estate. Fadzihan Abbas Ramlee, formerly vice president of strategy, has been appointed chief strategy officer.
Source: Asia Asset Management
Pilgrimage fund Tabung Haji will likely name Damshal Awang Damit as chief investment officer, according to people familiar with the matter. He was previously head of equity and fixed income at Socso, Malaysia’s social security organisation.
"His first day working at [Tabung Haji] is expected to be on January 21," one of the people familiar with the matter told Asia Asset Management.
Source: Asia Asset Management
Malaysia rejected all bids from companies seeking to buy stakes in the nation's biggest highway concession holder, as the government sets out another plan to lower toll fares to meet an election pledge.
The cabinet has decided that state funds Khazanah Nasional and Employees Provident Fund (EPF) will maintain their stakes in toll road operator Plus Malaysia, Prime Minister Mahathir Mohamad told reporters on January 16. The government has studied all proposals from the private sector, he said, without naming the bidders.
Plus is 51%-owned by Khazanah through UEM Group, with the rest held by EPF. The firm operates Malaysia’s longest expressway connecting the southern border with Singapore to cities near the northern border with Thailand.
Source: The Straits Times
Sovereign fund Khazanah and Norwegian telecoms company Telenor revived talks on a potential deal involving Axiata Group, according to people familiar with the matter. It came four months after the carriers scrapped negotiations on a broader merger of their Asian operations.
Khazanah Nasional and Telenor are in the early stages of exploring several possible scenarios including Telenor buying part of the state fund’s stake in Axiata.
Source: Bloomberg
SINGAPORE
Logistics real estate developer ESR Cayman and Singaporean sovereign wealth fund GIC will establish a joint venture with a total $500 million (S$673 million) in equity commitment to develop institutional-grade logistics facilities in key cities across China.
The venture with GIC is subject to regulatory approval, Hong Kong-listed ESR said in a media release on Monday (Jan 13). The firm is the sponsor of Singapore-listed ESR Reit.
The total gross floor area of the China portfolio assets held on ESR's balance sheet and in the funds and investment vehicles it manages comprised 6.62 million square metres, while total assets under management exceeded $4.39 billion, as of June 30, 2019.
Source: The Straits Times
Singapore sovereign investor Temasek is in talks to acquire Israel-based micro irrigation company Rivulis Irrigation.
Temasek and Rivulis’ controlling shareholder, Israel-based private equity firm Fimi Opportunity Funds, have yet to agree on a price, but the firm is asking for between $400 million and $500 million, according to people familiar with the matter.
The people added that Temasek is already conducting a due diligence process for Rivulis. While there are two other interested parties, Fimi is currently negotiating solely with Temasek, the people said.
Source: CTech
Temasek and Shanghai-based private equity firm Trustbridge Partners had talks with Wework to take majority ownership of the co-working company’s China unit, according to people familiar with the matter.
Temasek and Trustbridge are looking to take the majority ownership by buying more shares. The deal would value Wework China at $1 billion, representing a fall in valuation if the investment goes through. The discussions are still at an early stage, and a deal has not been settled.
Source: Tech in Asia
THAILAND
Thai finance minister Uttama Savanayana has ruled out the private sector’s request that policymakers set up a sovereign wealth fund in Thailand to curb the baht's strength. The government has no plans to establish such a fund because its incorporation would require the consideration of multiple issues, including the laws and scope of investment, he said.
Calls for the Bank of Thailand to earmark some of its $228 billion in foreign reserves to invest through a sovereign wealth fund to generate higher returns and tame the baht’s rise have been made from time to time.
The baht was the best performing currency in Asia, gaining almost 9% in 2019, though it has weakened almost 1% so far in 2020.
Source: Bangkok Post
INTERNATIONAL (EXCLUDING ASIA)
Family offices more than halved their holdings in alternative investments in 2019 while boosting their allocations to equities and fixed income, according to a survey by US research firm Peltz International.
The survey of 26 family offices found that they allocated 25% of their investments alternatives, with developed-market equities representing the bigget allocation, at 30%. Last year, however, alternative investments had made up some 52% of family office portfolios, alongside 22% for equities and 15% for fixed income.
This masked the fact that direct real estate, Reits and direct private equity saw their allocations rise, while hedge fund and private equity fund portfolios shrank,
Source: Chief Investment Officer