ASIA PACIFIC

The Covid-19 pandemic threatens to derail Asians’ retirement security and Asia’s multitrillion-dollar pension systems, which already faced major challenges before the outbreak hit.

As early as 2017, the World Economic Forum warned that a retirement savings gap – or shortfall between what people currently save and what they need for an adequate standard of living when they retire – would balloon from $70 trillion to $400 trillion in 2050, in just eight countries. Four of the eight countries with the largest retirement savings gap – China, Japan, India and Australia – are in the Asia Pacific region.

With investment returns already under pressure from a decade of low interest rates  and rising geopolitical uncertainty, the pandemic has only worsened these issues. Market volatility, deferred contributions or drawdowns as governments seek to help workers cope, as well as a lower-for-longer interest rate environment as a result of the pandemic, will only aggravate Asia’s retirement savings gap.

Asia Pacific funds have largely allocated assets to fixed income investments (51.7%) last year, while North American and European funds have predominantly invested in equities (43.9% and 50.9%, respectively), based on weighted average allocations by region, according to new findings by Willis Towers Watson.

The asset under management (AUM) of Asia Pacific pension funds has increased 9.9% from $4.72 trillion in 2018 to $5.19 trillion in 2019. The funds also experienced the largest annualised growth rate in the last five years at 7.0%, compared to the 5.5% average for the top 20 funds globally.

In terms of total AUM and number of funds, Asia Pacific remains the second largest region, accounting for 26.6% of all assets in the research, while North America continues to rank first at 43.8%. 

Japan’s Government Pension Investment Fund (rank 1), South Korea’s National Pension Fund (rank 3), China’s National Social Security Fund (rank 7), Singapore’s Central Provident Fund (rank 8) made it to the top 10 pension funds globally.

Source: Willis Towers Watson

AUSTRALIA

Hesta has entered into an international equities partnership with Martin Currie Investment Management, expanding on an existing mandate.

Martin Currie Investment Management will become the underlying investment manager for a new global equities portfolio for the A$52 billion ($38 billion) industry super fund. This is in addition to the Global Emerging Markets portfolio Martin Currie has managed since 2014.

The new portfolio will be managed by Martin Currie's Edinburgh-based Global Long-Term Unconstrained (GLTU) team, led by Zehrid Osmani. The GLTU strategy is a high conviction portfolio focused on long-term outperformance and backed by proprietary and systematic fundamental research.

Source: The Financial Standard

Hesta also updated its product disclosure statements to exclude investment in any company that provides services to detention centres.

The superannuation pension fund said the change is part of its responsible investment approach and will come into effect October 1, 2020.

Hesta's head of impact Mary Delahunty said the fund was already excluding those investments nationally, and wanted to expand the practice. This has captured two companies we had a very small exposure to of about A$4 million, it said.

Source: The Financial Standard

Future Fund chairman Peter Costello signalled that investors should not count on making easy passive returns from the sharemarket after massive stimulus policies in response to the pandemic put a rocket under stock prices in recent months.

The A$161 billion ($117.24 billion) Future Fund said it was preparing for a more volatile and challenging investment backdrop as it sharply lifted its allocation to cash and posted returns of minus 0.9% for the year to June, the first negative result since 2008-09.

In a sign of the fund's deeply cautious outlook, its allocation to cash surged by 75% in the June quarter to A$27.4 billion, or 17% of its portfolio.

Source: The Age

CHINA

The China Securities Regulatory Commission is planning to expand the scope of investments allowed in the Stock Connect link with Hong Kong, and allow foreign investors to trade more commodity futures products.

Officials are planning to announce revised rules on qualified foreign institutional investors as soon as possible to increase their “willingness and confidence” to invest in China, he said. Foreigners currently hold only 4.7% of Chinese stocks in circulation, way below the more than 30% in markets like Japan and South Korea.

Meanwhile, China is also tweaking its foreign exchange rules to make it easier for overseas institutional investors to buy onshore bonds. The People’s Bank of China and the State Administration of Foreign Exchange on Wednesday (September 2) issued a new draft regulation pledging to cut red tape and unify rules that covered different channels, such as the Bond Connect programme between the mainland and Hong Kong and the China Interbank Bond Market.

Source: Bloomberg, South China Morning Post

South Korea’s W752.2 trillion ($635.5 billion) National Pension Service (NPS) pension funds eked out a return of 0.5% for the first half of the year as fixed income and alternative investments helped it weather the impact of the Covid-19 market crash.

The pension’s top-performing asset class was global fixed income, which returned 7.9% during the first half, followed by alternatives and domestic fixed-income investments, which earned 4.24% and 2.13%, respectively, as of the end of June, and short-term assets returned 0.87%. Meanwhile, global equities and domestic equities were the worst performing asset classes, losing 3.46% and 2.41%, respectively.

The pension fund was able to withstand the global markets crash in March because it has a relatively low allocation to equities compared with some of its peers. Around 39.6% of the fund is allocated to equities, which is comprised of 22.3% in global equities and 17.3% in domestic equities.

Source: Chief Investment Officer

MALAYSIA

An announcement by Hong Leong Bank on August 28 said that the Employees Provident Fund (EPF) had acquired more shares in the group, which could have also led to better sentiment on HLB shares on September 1.

The banks’s share price rose more than 4% in Bursa Malaysia morning trade on September 1 on bargain hunting after the group proposed a final dividend of 20 sen per share for the financial year ended June 30 2020.

Source: The Edge Markets 

MIDDLE EAST

Abu Dhabi sovereign wealth fund ADQ is in talks to buy a stake in commodity trading firm Louis Dreyfus, potentially opening the family company to outside ownership for the first time in its 169-year history.

A deal would give the trading house an injection of much-needed cash as its controlling shareholder seeks funds to pay down loans, according to people familiar with the talks.

For ADQ, formerly known as Abu Dhabi Development Holding Co, acquiring a minority stake in one of the four largest traders of grains, oilseeds and sugar could boost food security for the United Arab Emirates, amid concerns brought on by disruptions caused by the coronavirus pandemic.

Source: Bloomberg

 

SINGAPORE

Singapore Exchange (SGX), in collaboration with HSBC Singapore and state-run investment company Temasek, completed its first digital bond issuance on SGX’s digital asset issuance, depository and servicing platform, the bourse revealed in a press release.

SGX successfully replicated a S$400 million ($293 million) 5.5-year public bond issue and a follow-on S$100 million tap of the same issue by Olam International. This marks the first syndicated public corporate bond in Asia, according to SGX.

Source: Singapore Business Review, Singapore Exchange

Singaporean sovereign wealth fund GIC said on September 1 that it has joined with co-investors, including Canada's Brookfield Infrastructure Partners, to purchase an Indian telecom tower company from a unit of Reliance Industries for $3.4 billion.

The acquisition gives the state investor and its partners a 100% stake in the telecom tower company held by Reliance Industrial Investments and Holdings, a wholly-owned subsidiary of Indian billionaire business magnate Mukesh Ambani's Reliance Industries.

Source: Nikkei Asian Review

GIC is also in the final round of talks with ESR, a logistics investor backed by Warburg Pincus, to invest in the latter’s second India-focused logistics fund. Though the exact investment is not known, GIC plans to put over Rs7.5 billion ($100 million) in the fund, which has a targeted corpus of around $300 million, said people in th

Source: Business Standard

Indian food delivery startup Zomato raised $62 million from Temasek, resuming a financing round that it originally expected to close in January this year.

Singapore’s state investment arm Temasek financed the capital through its unit MacRitchie Investments, a regulatory filing showed. Business intelligence firm Tofler shared the filing with TechCrunch.

A Zomato spokesperson in India did not respond to a request for comment on September 2.

Source: TechCrunch

INTERNATIONAL

The Canada Pension Plan Investment Board (CPPIB) confirmed its participation in the launch of a $2.6 billion Japanese logistics fund announced by GLP late last month, marking the latest cooperation between the pension fund manager and Asia’s largest logistics developer.

CPPIB, which has backed GLP ventures in Japan since 2011, is committing Y25 billion ($235 million) to GLP Japan Income Fund, an open-ended core vehicle which GLP and its partners have already seeded with a portfolio of 11 properties in Greater Tokyo and Osaka.

Source: Mingtiandi

After a modest decline the previous year, assets of the world's 300 largest retirement funds rebounded by 8% to $19.47 trillion in 2019, in what would prove to be the calm before 2020's coronavirus storm, according to the latest annual survey by Pensions & Investments and Willis Towers Watson PLC's Thinking Ahead Institute.

With the latest year's tally, growth for the past five years averaged a respectable 5%, said Marisa Hall, London-based co-head of the Thinking Ahead Institute, in an interview. But in the wake of the Covid-19 pandemic and the extraordinary policy response to it, the outlook for the coming five years looks considerably tougher, Hall added.