Insto roundup: AustralianSuper doubling PE position; Coronavirus hits insto travel plans
AUSTRALIA
Australia’s largest pension fund has been doubling its private equity holdings, exploring venture capital and expanding in New York and London as it sends more money offshore, to help invest a major cash inflow of A$16 billion ($11 billion) last year.
The inflow was fuelled by people switching to non-profit pension funds as misconduct scandals trashed the reputations of for-profit peers. It posed it with a “real challenge,” said Shaun Manuell, a senior portfolio manager at the A$185 billion fund. He noted that its overseas offices "are going to be important just to sort of build those relationships for other opportunities".
“There is only so much money we can invest in the domestic market so that marginal dollar is increasingly heading offshore.”
Source: Deal Street Asia
Cbus Property and retail landlord Scentre are only months away from commencing the transformation of the former David Jones menswear store in Sydney into a A$300 million ($197.91 million), luxury retail, office and residential landmark.
The two will get the keys for the 77 Market Street site in May, after which, under the scheme, Cbus will develop six floors of prime interconnected office space and 101 high-end apartments covering 22 floors.
It will kick off the redevelopment of the eastern end of the city where City Tatts is undertaking a new hotel on its existing club in Pitt Street and the new nearby Metro rail project. Charter Hall will also look at revamping its office tower at 201 Elizabeth Street.
Source: Commercial Real Estate
Hesta has hired Steven Semczyszyn to build an in-house Australian equities team as part of a broader programme that will see the A$55 billion ($36.28 billion) superannuation fund also internally manage cash and fixed interest strategies.
Named general manager of growth, Semczyszyn was the former chief investment officer of Australian equity fund manager JCP Investment Partners before it wound down last year after losing several key mandates. Hesta’s new Australian equities team is expected to be implemented by 2021, while plans for cash and fixed interest will get underway by 2022.
James Harman, who was promoted to the role of general manager for listed assets in 2015, will continue to oversee the remaining asset class exposures and become general manager of investment corporate strategy. The appointments are part of a new investment leadership structure for Hesta that has also created a new head of portfolio management role and head of portfolio design position which the fund is still recruiting for.
Source: Investment Magazine
Raphael Arndt, CIO of the A$168 billion ($111 billion) Future Fund, said the impact of the coronavirus emphasised the importance of a well-diversified investment portfolio to ride out financial market instability.
Speaking to a Senate committee in Canberra, Arndt said the federal government investment fund was “thinking very hard” about the impact of the coronavirus, including on Australia's largest trading partner, China.
“The impact of the virus is clearly significant, particularly on the Chinese economy," he said, adding: “we've been speaking for quite a few years now about the importance of understanding risk and the fact that we see risk is rising and the importance of a diversified portfolio. At the current time the Future Fund's highly diversified and we feel like it's very well positioned for this type of event.”
Source: Australian Financial Review
HONG KONG
The Hong Kong Monetary Authority (HKMA) will continue to monitor the latest developments of the coronavirus outbreak and their implications on the global economy, and adjust the Exchange Fund’s investments as and when appropriate, it said in an emailed reply to AsianInvestor.
Its business continuity plans, including split team and work-from-home arrangements, are in place, and HKMA’s day-to-day operations in reserves management remain uninterrupted, it said.
Regarding whether HKMA is considering a pay freeze for its staff, the de-factor central bank declined to be specific, only said there is an established mechanism for reviewing the pay of HKMA staff, and their pay is reviewed annually by the Financial Secretary.
Source: HKMA, AsianInvestor
JAPAN
Currency traders are watching as Japan's Government Pension Investment Fund (GPIF) is expected to increase its weighting in foreign bonds in a potentially market-moving portfolio review set for as early as this month. Such a change to the pension fund's asset mix could serve to limit the yen's gains at time when the coronavirus outbreak is stirring up volatility in financial markets.
The GPIF now targets weights of 35% for Japanese bonds and 15% for foreign bonds in its portfolio, but market watchers expect the allocation for domestic debt to be cut as long-term interest rates hover in negative territory. Changes would take effect in the fiscal year starting April 1.
Source: Nikkei Asian Review
Furthermore, the $1.57 trillion GPIF, the $252.4 billion California State Teachers’ Retirement System (Calstrs), and the UK’s £68 billion ($89 billion) Universities Superannuation Scheme (USS) are forming a partnership for sustainable investing to pressure companies and asset managers to integrate environmental, social, and governance (ESG) factors throughout their entire investment process.
In a salvo aimed at ESG investing naysayers, the CIOs of the two former and the chief executive of the latter released a statement warning the world’s companies and asset managers to focus on the long term and incorporate sustainable investing into their corporate strategy, or else they won’t have anything to do with them. They said companies that fail to heed their call “are not attractive investment targets for us,” and asset managers that also fail to do so “are not attractive partners for us.”
Source: GPIF
CBRE Global Investors and Universal-Investment have bought a new prime logistics property near Kobe in Japan on behalf of German pension fund Bayerische Versorgungskammer (BVK).
Completed in September 2019, the 42,000 sq.m. asset is located along the Chugoku Express Highway near Kobe, a city about 35 kilometres west of Osaka. The deal comes after CBRE GI and Universal sold the Midosuji Grand Tower in Osaka and acquired a portfolio of more than 1,000 residential units in the city on behalf of BVK in August last year.
Source: CBRE Global Investors
KOREA
National Pension Service (NPS) said March 6 that it would exercise its voting rights at Hanjin KAL, the holding firm of logistics conglomerate Hanjin Group, an apparent move to intervene in an ongoing leadership feud among the founding family members.
“The National Pension Service has decided to exercise its voting rights at Hanjin KAL and GIIR on its own after retrieving them from its proxy agents,” said the state-run pension fund operator after a meeting among its committee members that review issues related to responsible investment. GIIR is a holding company of advertising firms and an affiliate of LG Group.
The pension fund held a 2.9% stake in Hanjin KAL, which owns the nation’s largest airline Korean Air and logistics firm Hanjin Shipping, and the shares have been entrusted to some 10 different agencies.
Source: The Korea Herald
Furthermore, NPS has reportedly emerged as the preferred buyer of the Dalrymple Bay Coal Terminal in Queensland, Australia. The seller, Canada-based asset manager Brookfield, hired investment bank Bank of America to auction the terminal, which is one of the largest coal exporting ports in the world, in the fourth quarter of 2019.
Source: The Australian
According to industry sources, the main bid for Prudential Life Insurance Company of Korea is likely to be delayed as potential buyers have found it difficult to hold meetings with executives of the life insurer's US headquarters due to the coronavirus.
Although Prudential's US executives have talked with bidders through video conferences, sources said Korean employees have complained of the global headquarters' order to gather dozens of people at the same place.
Source: Korea Times
The Financial Services Commission (FSC) of South Korea’s plan to allow co-insurance to be used as a type of reinsurance arrangement for both life and non-life insurance segments will benefit both primary insurers and reinsurers, according to a commentary from AM Best.
Existing insurance legislation states that only risk premiums, or pure underwriting risk, may be ceded to reinsurers. According to the international insurance ratings firm, the change in regulation will allow transfer of other types of risk, such as future interest rate changes and policy cancellations.
If implemented, the new regulation will create a new source of capital for primary insurers in both life and non-life segments, especially in the light of the new risk-based capital regime, the Korea Insurance Capital Standard (K-ICS), and the upcoming IFRS-17. Reinsurers will also benefit from it, as it provides more business opportunities.
Source: Insurance Business Asia
NEW ZEALAND
An entity established by the NZ Super Fund and the owner of one of New Zealand's largest construction businesses have bought Auckland's Formosa Golf Resort and will amalgamate it with a neighbouring site.
A joint announcement from the fund and Russell Property Group which owns major national builder Dominion Constructors, said a partnership, Beachlands South LP, had been formed.
It will buy the 170 hectares club and a further 80 hectares at another property already owned by an associate of Russell Property Group. The properties are collectively valued by Auckland Council at NZ$81.5 million ($51.72 million). No price was announced and no plans revealed.
The Crown-backed New Zealand Venture Investment Fund (NZVIF) officially cut the ribbon on its NZ$300 million ($190 million) Elevate NZ Venture Fund.
Elevate was first flagged with Budget 2019, when then-Economic Development Minister David Parker said his Government would address a "venture capital gap" by diverting NZ$240 million of NZ Super Fund money to a new NZ$300 million fund, which would also include $60m from NZVIF to create a new fund.
The new Elevate Fund turbocharges NZVIF, which was established in 2002 and over the next 16 years invested NZ$173 million in some 239 New Zealand companies. NZVIF chief executive Richard Dellabarca said that the new fund would follow his agency’s long-standing model of coinvesting with private equity outfits – which will be in the driving seat.
Source: New Zealand Herald
The Polisario Front, a Western Sahara freedom movement, filed papers in the High Court to stop NZ Super from investing in the disputed North African territory claimed by Morocco.
For years the Front has tried to halt the extraction of phosphate from Western Sahara by Morocco, saying it belongs to the Sahrawi people. New Zealand companies Ravensdown and Balance Agri-Nutrients import about $30 million-worth of the product a year to spread on farms.
The Sahrawi representative to Australia and New Zealand, Kamal Fadel, alleges NZ Super is exposed in two ways to the disputed territory: it has investments in farms in New Zealand which use phosphate, and it invests through index funds in companies operating in Western Sahara. NZ Super said it does not accept the allegations and will defend the case.
Source: Stuff
SINGAPORE
Singapore state investor Temasek is on a shortlist of bidders to build a £1.5 billion ($1.96 billion) innovation district in Manchester. Two Chinese companies have pulled out of the competition.
Mapletree, the property arm of Temasek, is among the developers competing to build the district for the University of Manchester. The project will include up to four million square feet of development.
It’s understood that Beijing Construction Engineering Group and Beijing-based science park developer Tuspark, who had been on the longlist for the project, have pulled out.
Source: The Times
Singapore sovereign wealth fund GIC, Qatar Investment Authority and Abu Dhabi Investment Authority are in discussions to invest around $400 million in Bengaluru-based real estate developer Prestige Estates.
GIC, which holds about a 9% stake in the firm, is likely to allocate more to Prestige Estates as it is looking sell its retail mall and office assets before going for a Reit listing by the end of the year.
Prestige chief executive Venkat Narayana told Mint in January that around 6 million square feet of retail and commercial office space will be ready in the next ten months.
Source: Deal Street Asia
TAIWAN
Kuo Yuling, former vice-chairwoman at Taiwan-based China Life, has succeeded retiring Alan Wang to become its chairwoman.
She had led China Life to acquire Winterthur Taiwan from Axa in 2007 and PCA Life’s major assets and liabilities from UK-based Prudential Life in 2009, making China Life the fifth largest insurer on the island.
Source: United Daily News
INTERNATIONAL (EXCLUDING ASIA)
The coronavirus that has been stoking increasing volatility across global markets has begun to give rise to travel concerns among large US institutional investors, such as the Alaska Permanent Fund and the Pennsylvania Public School Employees’ Retirement System (PSERS).
Both organisations have both prohibited their employees from business-related international travel due to fears about them becoming exposed to the virus, according to a report from The Wall Street Journal.
The ban will last for the rest of March for Alaska Permanent’s employees, and until April 17 for Pennsylvania’s employees. While the rule remains in effect, employees have been asked to engage in meetings through teleconference and video calls.
Source: Chief Investment Officer; Wall Street Journal
US corporate pension plans dropped four percentage points to an 82% average funded ratio last month, the lowest level since 2016, thanks to the coronavirus, according to a report from investment advisory firm Wilshire Consulting.
On average, company pension systems ended the month at that level, as both asset values in portfolios fell 1.8%, while liabilities rose 2.8%, said Wilshire.
A significant decline in risk assets is among the factors driving the decrease. Meanwhile, liabilities jumped thanks to a 40 basis point decrease in Treasury returns, despite an increase in credit spreads.
Source: Chief Investment Officer