Insto roundup: Aussie supers cut alts values; Top Temasek holdings fall by third
ASIA
Asia Pacific and Australian life insurers are in a for a “rough ride” as the coronavirus pandemic wreaks havoc on the global financial markets, due to their sizeable investments in equities and bonds, warned S&P Global Ratings.
Financial markets have suffered sharp volatility over fears the Covid-19 pandemic could push the world into its worst recession since the 2008 global financial crisis. Equity markets have fallen by more than 30% while corporate bond spreads widened significantly by 40% to 120%.
S&P has moved to downgrade its outlook for the Asia Pacific’s life insurance sector to negative from stable, taking into account the new risk posed by the pandemic. The revised outlook applies to the Australian industry as well, said credit analyst Craig Bennett.
Source: insurancenews.com.au
AUSTRALIA
The planned merger of two of Australia’s smaller superannuation funds, MTAA Super and Tasplan, has been put off for six months until March 2021, due to the Covid-19 global crisis.
The merger to create a A$23 billion ($14.14 billion) fund – the first in the current cycle of industry consolidation – was originally set to be completed in October.
MTAA and Tasplan said on March 26 that the decision to defer came after a joint recommendation from MTAA Super CEO Leeanne Turner and Tasplan CEO Wayne Davy to the chairs of both boards, to extend the implementation of the merger because of sustained market volatility and concerns about supply of specialist services.
Source: IPE
Australia’s pension funds have begun slashing the values of their unlisted infrastructure and property investments, as countries around the world move into lockdown to combat the spread of the coronavirus pandemic.
AustralianSuper, the country’s largest pension fund, lowered the value of its unlisted investments by 7% due to the impact of the virus outbreak, chief executive Ian Silk said on March 24. The value of the fund’s unlisted assets, including airports, ports and toll roads around the globe, were reduced by 7.5% on average, he added.
UniSuper, an A$85 billion pension fund for the higher education and research sector, said it too had taken a 6% cut to unlisted infrastructure values and a 10% cut to unlisted property values.
Source: DealStreetAsia
UniSuper chief investment officer John Pearce said in an update that over the previous few weeks the pension fund had seen members switched A$2 billion ($1.23 billion) from growth assets to mainly its cash option. However, he said the fund had been able to "comfortably manage without selling shares at prices we believe are too cheap".
"Another way of looking at it – we’re effectively using our cash to buy the shares that members are selling," Pearce said.
He also cautioned against trying to time the markets in terms of selling equities and trying to buy them back at cheaper valuations, noting the super is a long-term investor.
Source: UniSuper
An unnamed global institutional investor provided A$450 million of initial equity to the ESR Australia Logistics Partnership, a new core-plus Australia-focused logistics partnership of Hong Kong-listed logistics developer and fund manager ESR.
EALP, which has been seeded with A$715.6 million of ESR's prime logistics assets, has a A$1 billion equity fundraising target.
Source: ESR
CHINA
China Taiping’s total investment assets stood at HK$760.3 billion ($98.06 billion) as of end-2019, up 25% over the last year-end. It earned an investment income of HK$32.636 billion during 2019, an year-on-year increase of 42.3%. The net investment yield was 4.72%, 30 basis points higher year-on-year.
Covid-19 has had some impact on China's overall economy and China Taiping’s operation. The insurer will continue to monitor the situation and its corresponding effect, and continue to assess and respond to its impact on the financial position and operating results.
Source: China Taiping
INDIA
Asian Development Bank will pump $100 million into India’s sovereign wealth fund, National Investment and Infrastructure Fund.
The bank joined the Government of India and Asian Infrastructure Investment Bank to invest in the fund, which has now secured $700 million in commitments.
Source: The Economic Times
JAPAN
Japan’s $1.6 trillion Government Pension Investment Fund confirmed its chief investment officer, Hiromichi Mizuno, will depart on March 31 after five years in the job. A successor has not yet been named.
Mizuno’s term was originally scheduled to conclude in October but was extended to March. He joined in January 2015 as the fund’s first dedicated CIO, and led large transitions in the portfolio’s strategic asset allocation while adhering to a strong environmental, social and governance (ESG) mentality.
Source: Chief Investment Officer
In addition, on March 24 Masataka Miyazono was unveiled as GPIF's new president, starting from April 1. Miyazono will replace current president Norihiro Takahashi, whose term is due to expire at the end of March.
Miyazono is the head of the Pension Fund Association and previously served as deputy president at agricultural lender Norinchukin Bank.
Source: Ministry of Health, Labour and Welfare
GPIF also teamed up with three European partners to promote green bonds and sustainability bonds, as well as the incorporation of ESG assessments in fixed income investments.
In the three separate partnerships, the Japanese pension fund will join forces with Dutch BNG Bank Germany's Kreditanstalt für Wiederaufbau (KfW) Sweden's Kommuninvest, respectively.
The BNG Bank partnership will promote and develop sustainable capital markets through a focus on sustainability bonds. The KfW and Kommuninvest partnerships will promote and develop sustainable capital markets through a focus on green bonds.
Source: GPIF on BNG Bank, KfW and Kommuninvest
Japan's biggest pension fund has also joined the Global Real Estate Sustainability Benchmark (GRESB) as a real estate investor member. GRESB provides a standardised benchmark and data of the ESG performance of real assets including real estate and infrastructure.
In compliance with its stewardship responsibilities, GPIF now requests its external real estate managers to actively use GRESB assessment in their investment and management process.
Source: GPIF
The cost of swapping yen into US dollars remains elevated in part due to signs that large Japanese government pension funds are planning to increase purchases of overseas bonds as they rebalance their portfolios.
GPIF will raise its foreign bond allocation target to 25% from 15%, Reuters reported. The pension fund has shifted from unprofitable domestic bonds into foreign assets, a move that other pension funds may mimic for better returns.
Source: Reuters
KOREA
Korea’s KB Financial Group has gained a lead in the horserace over mid-sized insurer Prudential Life, upon reportedly handing the highest bid of W2.2 trillion ($1.8 billion).
According to sources close to the affair, KB Financial Group offered to pay W2.2 trillion for the full stake in Prudential Life, outbidding other contenders – private equity firms Hahn & Company and IMM Private Equity, whose bids were no more than around W1.5 trillion.
The value of the insurer has jumped from W2 trillion to a maximum W3 trillion due to competition.
Source: Maeil Business News Korea
Many insurance firm CEOs have been buying back large amounts of company shares over the past few weeks, fanning expectations that the recent nosedive in stock value in a tumbling market will recover sooner than expected, industry data showed March 27.
The collective efforts seek to bolster returns for shareholders, as part of responsible corporate activity via stable management and proper valuation of firm shares, but the intended effect could be short-lived, according to an expert.
Source: Korea Times
Retirement pension savings have lost almost W1 trillion ($827 million) during March in South Korea as more seek to cancel their policies despite penalties, with the coronavirus taking toll on personal economy after companies streamline or send employees on unpaid leave.
The sudden drop in pension balance underlines the virus strain on livelihood as pensions are regarded the last resort for salary-earners.
Source: Maeil Business News Korea
Korea Development Bank (KDB) will not have to pay a fine over its delayed sale of KDB Life Insurance after the financial authorities concluded that the state-run lender – the owner of the life insurer for more than 10 years – had not violated the law.
The Financial Services Commission (FSC) said Monday (March 30) a private equity fund that KDB set up in March 2010 with Consus Asset Management to acquire the life insurer was not subject to the Financial Holding Companies Act, which bans private equity companies from owning financial services firms for a period of more than a decade.
KDB expects its sale of KDB Life will draw attention from potential buyers as the main bidding for the Prudential Life Insurance Company of Korea has finished.
Source: Korea Times
MALAYSIA
State-linked funds have been shoring up the market in March, providing support to the pummelled stock market amid the coronavirus outbreak.
Institutional funds including the Employees Provident Fund (EPF), Permodalan Nasional Berhad (PNB), Retirement Fund Inc (Kwap) and Lembaga Tabung Haji (TH) have been buying various big-cap stocks amid the onshore market sell-off.
EPF, in the third week of March alone, bought 68.8 million stocks in various counters on the FTSE Bursa Malaysia KLCI (FBM KLCI), according to Bloomberg data and Bursa Malaysia filings.
Source: The Malaysia Reserve
SINGAPORE
Singapore’s state investment firm Temasek will inject S$15 billion ($10.52 billion) in new equity and convertible bonds in Singapore Airlines as part of the country’s stimulus package to arrest the impact of coronavirus.
“This is a landmark package and necessary response to a unique situation,” Heng Swee Keat, Singapore’s deputy prime minister and finance minister, said in a speech in parliament on March 26.
Temasek already controls 55.46% of the airline’s shares.
Source: The Independent, CNBC, Reuters
The top 12 holdings of Temasek and the companies it controls have shed around one-third of their market value, or almost $24 billion, since January, according to a Bloomberg analysis.
Singapore's President Halimah Yacob said earlier in March that country must consider tapping past reserves to help its people and businesses that are "bleeding" due to the coronavirus outbreak.
Source: Business Times
The country’s sovereign wealth fund GIC has committed A$450 million ($276.5 million) to ESR Australia’s new logistic funds, according to people familiar with the matter.
Phil Pearce, ESR Australia’s chief executive, declined to confirm the ESR Australia Logistics Partnership (EALP) fund’s cornerstone investor but said the vehicle had a A$1 billion ($614 million) fundraising target.
Source: IPE
THAILAND
The Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) is calling on the government to halt contributions to the Social Security Fund for four months for employers and workers affected by the coronavirus.
Calling the current measures insufficient, the chairman of the Federation of Thai Industries and the JSCCIB, Supant Mongkolsuthree, requested various relief policies from the government.
Source: Bangkok Post
INTERNATIONAL (EX-ASIA)
On March 26, seven additional pension schemes from around the globe joined as signatories of the joint statement launched on March 3 by GPIF, California State Teachers’ Retirement System (Calstrs), and the UK Universities Superannuation Scheme.
The three issued a joint statement, Partnership for sustainable capital markets, on the ESG matters.
The new signatories are UK pension funds Railways Pension Scheme (RPMI Railpen), Environment Agency Pension Fund and Nest Corporation, Canadian British Columbia Investment Management Corporation, French Pensions Reserve Fund (Fonds de réserve pour les retraites), Dutch pension fund for government and education employees (ABP) and Health Employees Superannuation Trust Australia (Hesta).
Source: GPIF