Insto roundup: BLF fund to run dry; UK instos eye China
Corporate super fund IAG & NRMA Superannuation Plan, which serves employees of the Insurance Australia Group and NRMA Motoring & Services, will be outsourcing its investments and administration to Sunsuper as the corporate fund’s chair, David McClatchy, told members that “the fund could no longer operate as a standalone corporate superannuation fund”.
He said that members of the fund will be shifted to Sunsuper and the plan will be discontinued in its current form. The transfer is expected to take place in the latter part of 2019.
Source: Financial Standard
Future Fund and Canada Public Sector Pension Investment Board have exited their investments in DP World, with the Dubai-based entity taking up most of their stakes as it took back control via a “majority stake”.
In addition, institutional investors, mostly pension funds, will be taking minority stakes in DP World but it is believed that no Australian funds were engaged,a media report said.
Source: Australian Financial Review
The China Banking and Insurance Regulatory Commission has removed restrictions preventing insurance firms from purchasing tier-2 and perpetual capital bonds issued by banks, a move that rating agency Standard & Poor's said will increase the risk arising from cross-investing into financial institutions.
According to the credit rating agency, these perpetual bonds provide insurers with more investment options as they seek long-duration and liquid investments to match their lengthening liability durations. However, mounting exposures to financial institutions could come at a cost for insurance companies, due to increasing sector concentration.
Source: CBIRC, S&P
The Government Pension Investment Fund's (GPIF) assets under management fell from ¥165.61 trillion to ¥150.66 trillion ($1.51 trillion to $1.37 trillion) in the final three months of 2018, a loss of $136 billion. It was the largest quarterly loss the pension fund had ever experienced.
The huge drop was mainly due to GPIF's increased investments into local and international equity and bond markets. Fifty percent of its portfolio is invested in local and international shares. While this netted it strong returns in 2016 and 2017, the downside of this exposure was made clear last year.
The pension fund noted that its domestic equity benchmark, the Topix, fell 17.6% in the fourth quarter, while the MSCI ACWI index dropped 15.52%. The poor quarterly performance means GPIF's total rate of investment return for the first three quarters of its fiscal year is -4.31%.
Sources: Government Pension Investment Fund, Japan Times
Japanese insurers are set to spend more money on acquisitions in Asia and particularly China, as they seek to diversify from their home nation's ageing and shrinking local population. Nippon Life and Tokio Marine have both made their desire to acquire international rivals clear, and Japanese insurers as a whole engaged in M&A deals worth $6.1 billion in 2018, according to Refinitiv data.
This was mostly done in the US and Europe, but China's gradual loosening of its insurer owner rules to let foreign firms take a majority interest is luring insurers from neighbouring countries a chance to enter the under-penetrated Chinese insurance market.
Prime Minister Narendra Modi is likely to launch the government’s new pension scheme for the informal, or unorganised, sector workers on February 15, with a trail run of the software underpinning the new scheme scheduled for this week, an Indian media report said.
The scheme will be administered by the Life Insurance Corporation of India, the country's biggest state-run life insurer, the report said, quoting an unnamed senior government official.
India’s so-called informal sector employs about 420 million people, according to the census of 2011, and accounts for half of the country’s gross domestic product (GDP).
Source: Hindustan Times
South Korea’s Government Employees Pension Service (GEPS) is planning to invest W300 billion ($270 million) in overseas bond exchange-traded funds (ETFs). The pension fund will select three asset management companies by March, according to its statement issued on January 31. It plans to increase the portion of overseas bonds to 11.9% by the end of 2023, which is currently 6.8%.
“In this uncertain environment caused by the global economic slowdown and US-China trade war, we seek more profits and more stable portfolio through overseas bonds ETF,” said its chief investment officer Lee Chang-hoon.
Currently, GEPS has assets of more than W10.9 trillion under management.
Source: Yonhap Infomax (In Korean)
National Pension Service (NPS) will actively exercise its shareholders' rights over Hanjin KAL, the holding firm of national flag carrier Korean Airlines, said the welfare ministry on February 1.
The W644 trillion pension fund is beginning to assume its stewardship responsibilities in a gradual manner after setting up a stewardship office in 2018, largely at the behest of president Moon Jae-in. He sees having the formerly passive investor wield its size to enforce stewardship a useful indirect way to help meet his goal to improve governance and reduce corruption among Korea's chaebol.
Hong Nam-ki, the minister of economy and finance, said NPS's decision is designed not to interfere in the management of Korean Air's holding company, but to raise its corporate value by enhancing transparency and fairness at the company and to secure the profits of the pension fund. Korea Airlines has been beset by scandals involving the chairman's family members.
Sources: Yonhap News Agency, Reuters
New Zealand regulators have slammed life insurers over poor governance and conduct after a review.
In a report by the Financial Markets Authority (FMA) and Reserve Bank of New Zealand (RBNZ) that reviewed 16 insurers in New Zealand, the regulators echoed industry misconduct reported in Australia’s Hayne royal commission as it told of weaknesses in lifers’ systems and controls, weak conduct governance and the negligence of good customer outcomes.
All 16 life insurers will receive individual feedback. By 30 June 2019, each insurer will need to report back to the regulators with an action plan that the regulators will review, including how they will address incentives based on sales volumes for internal staff and commissions for intermediaries.
Source: Insurancenews.com.au, Reserve Bank of New Zealand
President Rodrigo Duterte will ask Congress to prioritise the passage of a bill reforming the pension system for members of the military and other uniformed personnel.
The President made this commitment in a cabinet meeting last week, according to a spokesperson quoted in a media report.
"Also discussed was the Military and Uniformed Personnel (MUP) Pension Reform Bill proposed by the Department of National Defense which the President said he will certify as an urgent piece of legislation," presidential spokesman Salvador Panelo said in a palace briefing, the report said.
Reportedly,among the provisions of the proposed measure include raising the age of compulsory retirement from 56 to 60. Panelo said it would actually be favorable for soldiers who want to stay in the armed forces for more years.
The Bureau of Labor Funds (BLF) will see one of the six funds under its management run out of money by 2026, according to the latest actuarial report released by the Bureau of Labor Insurance under the Ministry of Labor.
The NT$686 billion ($22.2 billion) labour insurance fund, which accounted for 17% of the pension fund's assets of NT$3.95 trillion at the end of December 2018, will report its first negative fund balance by 2026, one year earlier than previously estimated.
Deputy Minister of Labor Shih Keh-her has pledged to fill the funding gap with NT$20 billion next year after gaining the approval of the Executive Yuan (the executive branch of the government), and said the government would bear the ultimate responsibility to pay for workers’ insurance.
In a statement, BLF that it has sought to diversify investments in the fund, which has delivered an average investment return of 3.31% in the past ten years. It declined to comment on AsianInvestor queries about the labour insurance fund running out of money in seven years.
Sources: Ministry of Labor, BLF, United Daily News
The Financial Supervisory Commission (FSC) is proposing to revise foreign-exchange volatility reserve rules for insurers, which is seen by Moody’s as credit negative for insurers because this would incentivise firms to lower their hedged ratios against potential Taiwanese dollar appreciation.
Under the proposed rules, insurers can use the reserve to offset up to 60% of their foreign exchange gains/losses, versus 50% currently, when the market hedging cost of currency swaps is higher than 2% of the notional value. This will essentially allow insurers to reserve part of their retained profits to absorb potential foreign-exchange losses.
Sources: Moody’s, FSC
Institutional investors and consultants in the UK showed more interest in Chinese and emerging market equities last month, according to the January 2019 eVestment Institutional Insights report released yesterday.
Funds attracting the most attention included China equity strategies from Allianz Global Investors and Zeal Asset Management and EM equity products from Calamos Investments, Candriam, GMO, JP Morgan, Neuberger Berman and Robeco.
Meanwhile, investors and consultants globally increased their focus on global equity strategies more so than any other segment last month, noted the report.
Oregon Investment Council, which runs the $75 billion Oregon Public Employees Retirement Fund, has invested with Shanghai-based ClearVue Capital for the first time. In December it committed $200 million to ClearVue Partners III, a growth equity fund investing in China, according to the minutes of a board meeting released last month.
Separately, the council expects to commit $2.5 billion to $3.5 billion to private equity in 2019, making 10 to 15 commitments of $100 million to $500 million each. It also plans to relaunch its co-investment programme this year.
Sources: Deal Street Asia, Pensions & Investments
The $54 billion Los Angeles County Employees Retirement Association (Lacera) is expanding its healthcare investments in China by putting $100 million into Lilly Asia Ventures’ LAV Bioscience Fund V.
Lacera had previously invested $40 million into LAV’s fourth bioscience fund, according to a December memo.
“China currently is the fastest-growing major healthcare market in the world with a five-year compound annual growth rate of 17%, compared to just 4% in the US,” read the memo.
Source: Chief Investment Officer
The US-China trade war is a key concern for the New York City Bureau of Asset Management, the financial adviser to the city’s five public pension plans (covering teachers, employees, the board of education systems, the police and firefighters), it emerged at a meeting last week.
Among other things during a rough December for investors, Apple’s November pre-earnings report, forecasting fewer iPhone sales in 2019, spooked the markets, Michael Haddad, deputy CIO of the Bureau, said at the February 6 meeting.
“It triggered a market view that the combination of China’s slowing and the trade tariffs were going to be damaging to US businesses going forward, and it kind of spilled into all things China in that whole fourth-quarter environment,” he added.
Source: Chief Investment Officer
US public pension funds are raising their focus on diversity in relation to their manager selection and/or investment processes, going by developments in the states of New York and Oregon.
The New York City Bureau of Asset Management, the financial adviser for the city’s five pension funds, wants them to come up with a more extensive questionnaire for external asset managers about their diversity.
Meanwhile, Oregon Investment Council, which runs the $75 billion Oregon Public Employees Retirement Fund, has amended its investment and management beliefs, putting a stronger focus on diversity and inclusion, with the aim of improving investment outcomes.
Source: Chief Investment Officer – two stories: one on New York and one on Oregon
Munich Re has opened a representative office in Bangkok.
It also appointed Lucien Heijstee as chief representative for Thailand. He joins from Thaivivat Insurance, where he was executive vice president for underwriting and reinsurance, as well as a member of the board for close to a decade.
Roland Eckl, CEO of Munich Re Asia-Pacific, noted that Thailand is a strategic growth market in Southeast Asia, where the German reinsurer has made a long-term commitment, according to a media report.