Insto roundup: China state funds help cool stock rally; GPIF pays well for alpha
AUSTRALIA
Industry fund Hostplus has revised its asset allocation, bumping the allocation to cash in its balanced option up from 0% to 5%.
The change to the cash allocation was effective from June 19, 2020, when the fund also reduced its allocation to alternatives from 8% to 5% and equities from 44% to 42% in the balanced option. In its balanced option, the asset allocation range for cash is now 0-15%; it was previously 0-10%.
For Hostplus as a total fund, not just the balanced option, it now has a 10.8% allocation to cash - amounting to A$4.9 billion ($3.3 billion). Hostplus' former 0% allocation to cash in its balanced option prompted questions about the fund's ability to handle early release of super requests.
Source: Financial Standard
Australia’s second-largest pension fund, First State Super, aims to almost halve carbon emissions across its investments within a decade.
“Divestment from thermal coal mining is an important first step, but we recognise there is more to do,” chief executive Deanne Stewart said."An important first step on our path to a low carbon economy is to divest from businesses that derive more than 10% of their revenue from thermal coal by October 2020," the A$120 billion fund said in a statement.
Source: First State Super, Bloomberg
Super fund developer Cbus Property, in conjunction with its local partners Nielson Properties and the Raniga family, is pushing ahead with a major Brisbane project, lodging plans for a A$600 million ($418.4 million) office tower.
The development is slated for a 3000-square-metre riverfront corner site, created from the amalgamation of properties at 205 North Quay and 30 Herschel Street.
In line with Cbus Property’s commitment to achieve net zero carbon across its portfolio by 2030, 205 North Quay is targeting 6 Green Star and 5.5 Star Nabers Energy ratings.
Source: The Australian Financial Review
Australia’s coronavirus-related superannuation early withdrawal scheme has hit A$25 billion as the new financial year starts.
The latest figures show up to 2.4 million people have applied for early withdrawal of part of their superannuation, with around $25 billion worth of applications approved by the Tax Office (ATO).
The ATO data covers the period from when the scheme opened up to July 2, with more applications expected as the second tranche of withdrawals only opened on July 1.
Under the scheme, those experiencing financial hardship due to the pandemic could withdraw up to A$10,000 from their funds last financial year and a further A$10,000 this financial year, without facing tax penalties.
Source: ABC
Australian pension fund Hesta has committed to reduce absolute carbon emissions by one-third within 10 years and becoming “net zero” by 2050, which is in line with the goals of the Paris Agreement.
“Climate change presents a financial risk to the Hesta investment portfolio and the world in which our members will retire,” said Debby Blakey, chief executive of the A$52 billion ($36.2 billion) fund, in a statement.
The fund said it is developing a climate change transition plan that will introduce carbon reduction targets for the Hesta investment portfolio to manage financial risks while looking for investment in opportunities within the low-carbon transition.
Source: Chief Investment Officer
CHINA
Chinese state funds on July 9 announced plans to trim holdings of domestic stocks that have soared in the past week, suggesting Beijing wants to cool the speculative frenzy in its $9.5 trillion equity market.
The National Council for Social Security Fund said on July 9 it intended to sell a stake of as much as 2% in People’s Insurance Company of China. The National Integrated Circuit Industry Investment Fund announced plans to offload shares in three firms.
On July 10 the state-run China Economic Times warned about the dangers of a “crazy” bull market, while Caixin reported that regulators had asked mutual fund companies to cap the size of new products. The SSE 50 Index of Shanghai’s largest stocks ended July 10 down 2.6%, having closed the day before within 2 percentage points of its intra-day peak in 2015.
Source: Bloomberg
The China Banking and Insurance Regulatory Commission (CBIRC) has targeted misbehaving shareholders of banks and insurers by naming and shaming 38 corporate investors for having “gravely” violated rules and laws.
The shareholders named have engaged in activities such as flouting regulatory ownership rules, using unqualified sources of funding, fabricating materials or profiting from illegal transactions, the CBIRC said on July 11. Despite the clean-up efforts of the past few years, some shareholders in banks and insurers still engage in illegitimate ways, said the watchdog.
The list includes shareholders in Anbang, Kunlun Health Insurance and Ningbo Donghai Bank, according to the CBIRC statement and information compiled by Reuters based on China’s business registration database. The regulator said such lists would be regularly published in future.
Source: Reuters
Chinese insurers have been urged by the China Banking and Insurance Regulatory Commission to step up Covid-19 economic support to help stabilise businesses.
Source: Insurance ERM
INDONESIA
Indonesia plans to close down embattled state life insurer Asuransi Jiwasraya and create a new company to settle outstanding claims, a move requiring state investment, the firm’s chief executive said on July 8.
“The concept is to save policyholders,” Hexana Tri Sasongko said in a text message. “Policies are restructured then transferred to the new company that will be formed under the state insurance holding company using a capital injection.”
Such a plan could further strain the state budget, with spending to help the economy rebound from the impact of the coronavirus pandemic seen keeping the fiscal deficit wide in the next few years.
Source: Reuters, The Jakarta Post
JAPAN
The Government Pension Investment Fund's latest annual report reveals that it was willing to pay good fees to those fund managers that offered alpha, with its foreign active equity managers particularly benefiting.
The ¥150.6 trillion ($1.4 trillion) pension giant introduced fee incentive programe in the 2018-2019 financial year, paying a passive-equivalent rate for fund managers failing to deliver alpha, but offering more for those that did, while lifting previous ceilings on performance fees that managers can earn.
For the fiscal year ended March 31, GPIF's saw foreign equities fall 13.1%. However, half of its eight active foreign equity managers bested their benchmarks by a healthy margin, and fees paid to the group jumped to ¥15.5 billion, from ¥10.7 billion the year before. Leading the way was Walter Scott & Partners, which topped its MSCI Kokusai benchmark by 7.8 percentage points and gained ¥4.14 billion in fees, up from ¥2.30 billion the year before, according to estimates by Pensions & Investments.
Source: Pensions & Investments
Nippon Life Insurance plans, over time, to invest ¥30 billion ($280 million) into companies – in fields like health care, food and climate change – that provide solutions to social and environmental issues.
The Japanese insurer will start by committing ¥2 billion to TPG Capital’s impact investment fund this month. Nippon Life will work with the US private equity firm to learn the ropes, after which it hopes to be able to make independent investments in such companies after three years.
Japan has been a slow starter in this segment but this move by Nippon Life Insurance, which manages around ¥67 trillion in assets, could prompt other players to follow.
Source: Nikkei Asian Review
KOREA
The National Pension Service (NPS) increased equities in convenience stores, healthcare, battery and gaming names, while unloading holding in traditional producers and travel businesses in the first half dominated by the virus pandemic.
According to a disclosure made by NPS on its stock holdings as of July 3, the state institutional investor with over W700 trillion won ($585.9 billion) worth assets under management, owned shares in 152 companies publicly trading in Korea.
NPS has expanded shares in several sectors last month, notably convenience store operators’ shares and those that have emerged as potential beneficiaries from the changes in lifestyle due to the coronavirus crisis.
Source: Pulse News
MALAYSIA
Pilgrimage fund Tabung Haji announced on July 9 a net profit of RM1.25 billion ($293.5 million) for the first half of 2020 compared with RM849.66 million in the same period last year.
In a statement, the fund said it recorded RM1.55 billion in investment income supported by sukuk and equity investments with total assets exceeding liabilities by RM1.86 billion as at June 30, 2020.
Fixed income investments contributed RM1 billion or 65% of total investment income from January to June 30, 2020. Property investments generated an income of RM204.57 million, Islamic money market investments contributed RM187.13 million and RM150.27 million was derived from equity investments.
Source: Free Malaysia Today
SINGAPORE
Temasek chief executive Ho Ching did not deny reports that the Singapore investment firm had a portfolio value of more than S$300 billion ($216.11 billion) as of March 31.
The audited portfolio performance should be finalised over the next couple of weeks, Ho said, adding that it was unlikely that the figures would be "very far from the above".
She wrote in a Facebook post on July 8 that she was "impressed with the analyses" from reports that speculated on Temasek's portfolio performance, and that the figures were "pretty close to [Temasek's] own management estimates".
Source: The Straits Times
Temasek subsidiary Heliconia Capital Management has acquired a 25.03% stake in technology solutions provider CSE Global through a deal with Serba Dinamik International, according to an announcement. CSE hopes to leverage Heliconia’s network and expertise to support its growth plans.
Following the acquisition, Heliconia has requested that CSE consider the appointments of its chairman Lim How Teck and chief executive Derek Lau as non-executive directors to the board.
Source: Singapore Business Review
TAIWAN
Taiwan Life Insurance, Shin Kong Life Insurance and a venture capital unit of Shin Kong Financial Holding have formed a NT$3 billion ($101.42 million) venture with solar module supplier United Renewable Energy to build and operate solar power plants in Taiwan.
Taiwan Life has invested in, or granted loans to, NT$20 billion of solar energy projects, showing its support for the government’s energy policy since 2014, the insurer said.
The investment comes at a time when the Taiwan government is aiming to make renewable energy account for 20% of power generated on the island by the end of 2025.
Source: Taipei Times
INTERNATIONAL (EXCLUDING ASIA)
The White House has warned that investments into Chinese assets by the US’s National Railroad Retirement Investment Trust (NRRIT) are an unnecessary economic risk that pose a national security threat to America and raise humanitarian concerns.
In a written response, Erhard Chorlé, chair of the Railroad Retirement Board, a federal agency, said the board took the concerns “seriously” but did not have direct oversight over the NRRIT.
He added that the $24.5 billion trust had assured the board in June that it did not have any investments in Chinese companies, such as surveillance equipment maker Hikvision or telecommunications company ZTE, about which the Trump administration had raised concerns.
Source: Financial Times