AUSTRALIA

Mark Delaney

AustralianSuper’s chief investment officer, Mark Delaney, warned of “very low or even negative returns” as the current economic cycle draws to an end in a statement on July 4.

“As we start to get closer to the end of the current economic growth cycle, members need to prepare themselves for that,” said Delaney.

His comments came after Australia’s biggest pension fund posted a decade-long growth streak, thanks to its default investment option that returned 8.7% in the 12 months ended June 30. The gains helped grow the fund’s asset under management to A$160 billion ($111.7 billion).

Source: Bloomberg

Fund managers are being squeezed as more large Australian pension funds bring investment functions in-house and push for an end to traditional percentage-based charges in favour of a flat-fee structure that they say is fairer and more transparent. 

That could threaten the A$16 billion ($11.3 billion) of fees money managers raked in last year from managing Australia’s $2 trillion of retirement savings – a figure that had doubled in just three years, according to data provider Rainmaker Group.

JP Morgan Asset Management Australia last month reduced management fees on all bond funds, including cutting charges for its flagship global bond fund by 33%. Melbourne-based JCP Investment Partners closed entirely, with local media reporting that the loss of some key mandates and fee pressures had taken their toll.

Source: Deal Street Asia

Some superannuation funds are becoming wary of private market investments highlighted potential risks arising from holding these assets, despite a greater involvement of their peers in taking advantage of illiquid investments.

“Ok personal view (ducks for cover). We’ve learnt zero from the GFC (global financial crisis) and lessons from the near lockup by funds like MTAA and access capital advisers,” tweeted Con Michalakis, chief investment officer at A$8 billion ($5.6 billion) industry fund Statewide Super on June 29. His concerns echoed with that of Andrew Maloney, chief executive for Student Super.

“Private assets should outperform a lot of other assets. And that can be all true, but at the same time you don’t have a highly liquid market to transparently value the asset. So you can end up with a wide range of valuations – a lot of which are pretty defensible,” he said.

Source: Stockhead

CHINA

Full foreign ownership of securities firms, futures businesses and life insurance companies will be allowed by 2020, Premier Li Keqiang said at the World Economic Forum in Dalian.

The change brings removal of caps forward by one year, as was first announced in late 2017. The announcement underpins China's policy to continue to open up its financial industry despite the trade war between the US and China.

Source: Bloomberg

INDIA

India will need $1 trillion of infrastructure investment to nudge annual GDP growth higher by just half a percentage point. Of this, at least 55% will need to come from public funding, according to the Confederation of Indian Industry, according to new finance minister Nirmala Sitharaman. To raise such a large amount, the country may well need to consider recycling infrastructure, selling existing projects to institutional investors and large fund managers. 

Sitharaman presented her first annual budget as part of Prime Minister Narendra Modi’s second five-year term. 

Source: Bloomberg, The National

JAPAN

Hiromichi Mizuno, chief investment officer of the Government Pension Investment Fund (GPIF), said he is not convinced that green bonds will become a mainstream investment product.

Hiromichi Mizuno, GPIF

GPIF is becoming more heavily involved, demanding that its asset managers weave environmental, social and governance parameters into their investments. Buying green bonds is a “direct” way to achieve similar aims.

For issuers, green bonds are “more costly and complicated and cumbersome” to arrange, he said, while for investors, “it’s a bond with the same credit rating and the same interest rate – but they have to live with less liquidity”. For green bonds to catch on, they have to be cost-effective for borrowers, Mizuno said. 

Total global issuance of the bonds, which are issued to support specific environmental projects, is expected to hit $200 billion by the end of the year, from $167 billion in 2018.

Source: Financial Times

GPIF reported a profit of ¥9.1 trillion ($84.4 billion) for January to March after a record loss in the prior quarter, thanks to an upturn in stock markets. 

The annual investment return rate stood at 1.52%, as the ¥159.2 trillion pension fund secured a profit for the third straight year. Still, its investment return fell sharply from ¥10,081 billion in fiscal 2017.

GPIF had suffered a record ¥14.8 trillion loss in the three months ended in December as worries about the escalating US-China trade war battered global markets. As AsianInvestor wrote, the position of CIO is up for renewal in September.

Source: Reuters, Jiji Press

KOREA

Korea Post has awarded two real estate debt investment mandates worth $150 million to Blackstone and Principal Asset Management, its savings unit said on July 4.

The state-run agency’s investment committee recently decided to entrust $100 million to Blackstone’s blind-pool real estate debt fund and $50 million to Principal AM to invest in mezzanine notes.

They were mandated to have US property debt account for at least half of their portfolios, with a maximum leverage of 50%. Their average loan-to-value ratio should not exceed 80%, with a term of up to 10 years.

Source: Korean Investors

The total assets under management of state pension fund National Pension Service (NPS) exceeded the W700 trillion ($596 billion) mark, data showed on July 8. The fund’s assets stood at W701.2 trillion, up W62.4 trillion from the end of 2018.

The milestone comes 31 years after Asia‘s fourth-largest economy launched retirement fund. It has grown exponentially from an initial W530 billion to exceed W100 trillion in 2003, W300 trillion in 2010 and surpass W500 trillion in 2015. NPS's investment return stood at 6.81% as of April, with the cumulative return rate since 1988 standing at 5.4%.

Source: Yonhap News Agency

NPS has recently increased stakes in garment, game and entertainment stocks on bets on their growth potential due to spending by young people.

Korea Exchange and NPS recently announced that the fund has changed its stake-holding in 128 companies. Most of the firms where the fund newly posted stockholding of minimum 5% and increases by more than 1 percentage point were fashion brands, game publishers and entertainment agencies.

Source: Maeil Business News

South Korea’s leading life insurer Samsung Life has shed almost half of its stake in DGB Financial Group to bolster capital ahead of the introduction of IFRS17, a new accounting standard for insurers that will take effect in 2021.

Samsung Life sold a 3.6% stake in DGB, reducing its stake from 6.95%. The sale will help the life insurer secure as much as W47.7 billion ($40.8 million).

It was the first large-scale stake sale by Samsung Life in the Daegu-based financial holding firm after it had bought a stake in DGB Financial, formerly Daegu Bank, 40 years ago. 

Source: Maeil Business News

MALAYSIA

Malaysia’s Employees Provident Fund said it’s looking to add to its London property portfolio to take advantage of falling valuations ahead of the UK’s likely exit from the European Union later this year.

After the $150 million acquisition of British retailer Sports Direct International’s logistics facility in May, EPF chief executive Tunku Alizakri said he was “finalising some deals” in the UK and that now is the time to invest into the country.

The state fund must invest 30% of its $203 billion in assets overseas. And given “challenging” yields, Alizakri said, “we will have to seize the opportunity to acquire quality assets as and when it arises and meets our risk profile”.

Source: Nikkei Asian Review

MIDDLE EAST

Sovereign institutions from the Middle East are increasingly focusing on investment opportunities in emerging markets, particularly Asia, at the expense of European assets, according to the Global Sovereign Asset Management Study by Invesco.

The study showed Middle East investors are increasing allocations to Asia as a whole, with 75% having increased allocations in 2018 compared with 47% for all investors surveyed. Indications are that this trend will continue in 2019.

Meanwhile, half of Middle East sovereign investors reported decreasing allocations to Europe in 2018 and a similar share are planning further decreases in 2019. Only 13% of global sovereigns plan on increasing allocations to Europe this year, compared to a 40% allocation to Asia and 36% to Emerging Markets.

Source: Gulf News

PHILIPPINES

The chairperson of the Philippines Ways and Means Committee is seeking to increase the social pension to seniors by 100% to PHP12,000 ($233.5) a year. 
 
Senator Sonny Angara cited a study by the Coalition of Services of the Elderly that more than half of the country’s senior citizens do not receive any form of pension. Some senior citizens are provided with a social pension amounting to PHP500 per month or PHP6,000 a year.
 
Senator Angara has filed Senate Bill 133 that would amend the Expanded Senior Citizen’s Act of 2010, to increase the social pension granted to senior citizens. The bill also seeks to widen the coverage to include senior citizens who do not receive any form of pension.
 
 
SINGAPORE
Lim Chow Kiat, GIC

Sovereign wealth fund GIC invests some 30% of its portfolio in Asia, and there’s a good chance that share will rise if the region continues its strong growth trajectory, chief executive Lim Chow Kiat said at a news conference.

Banking on Asia’s continued rise, GIC said in its latest annual report released on July 3, that it is looking to buy the “growth story” before this is fully priced into valuations. Having started out gaining Asian exposure via multionationals, the fund has been increasingly making direct investments into Asian corporates over time.

The geographical distribution of GIC’s assets has shifted in the past five years, with Asia excluding Japan making up 20% of its portfolio as at March 31 this year, up from 17% as at end-March 2014. Meanwhile, its share of assets in the US, while remaining the largest, has decreased from 34% to 32% in the same period.

Source: Straits Times

Airtel Africa said Temasek had built up a 7.6% stake in the Africa-focused telecommunications firm following a transaction. Temasek owns 285.3 million shares in Airtel following the transaction. 

Airtel held its initial public offer on the London Stock Exchange in late June.

Source: Alliance News

REST OF WORLD

Sovereign investors globally are upping their exposure to bonds and reducing their equity holdings in a defensive shift in anticipation of the end of the decade-long bull market.

Their fixed income allocations rose to 33% this year from 30% in 2018, the highest level in four years, meaning they have overtaken stocks as SWFs’ biggest allocation, according to US fund house Invesco’s annual survey of sovereign wealth funds and central banks. Allocations to stocks fell from 33% to 30%.

“They’re moving more to defend and diversify,” said Alex Millar, head of Emea institutional at Invesco. Most state-backed investors expect the end of the current economic cycle within the next two years.

Source: Financial Times

Dutch pension fund manager APG has committed to invest up to A$600 million ($420 million) to Australian real estate debt in its first foray into Asia-Pacific property financing.

APG has teamed up with Australian commercial property debt manager MaxCap Group and will target first mortgage stretch-senior loans, focusing on construction lending across different asset classes.

The pension fund has made an initial commitment of A$300 million to the strategy with an option to raise the total to A$600 million. The partnership has already invested in a mixed-use development in Melbourne as the strategy’s seed loan.

Source: APAC Real Estate

The global campaign to encourage insurance companies to phase out support for the coal industry secured one of its biggest victories to date this week, as US insurer Chubb announced a detailed new coal underwriting and investment policy.

The company announced it will no longer underwrite the construction and operation of new coal-fired plants or new risks for companies that generate more than 30% of their revenues from coal mining or energy production from coal.

In addition, insurance coverage for existing coal-plant risks that exceed this threshold will be phased out by 2022, and for utilities beginning in 2022.

Source: BusinessGreen