Insto roundup: GPIF braces for huge loss; Korea pensions on bargain hunt

AUSTRALIA

Fears are rising that Australia’s $2 trillion pensions industry could see retirees dash to withdraw their investments amid huge equity market falls sparked by the coronavirus outbreak, potentially causing liquidity issues.

“It is not inconceivable that the community anxiety which has resulted in panic buying of groceries could see similar behaviour played out in [pensions] and cause a ‘run’ across the whole system,” according to a letter recently sent by pension industry groups to the Australian government and seen by the Financial Times.

Australia’s share market has fallen 24% since the start of the year – its worst quarterly performance since 1987 – and the value of pension funds’ assets has dropped by about 15%.

Source: Financial Times

The A$44 billion ($26.72 billion) Hostplus told members on the evening of April 2 that it was devaluing its property and infrastructure investments by 7.5% to 10% and cutting its private equity and venture capital investments valuations by an average of 15%. These assets make up over 30% of Hostplus’s flagship balanced investment option.

Hostplus chief executive David Elias said the fund had bolstered its cash reserves to A$6 billion, up from A$2.1 billion on March 30. He also pointed to devaluations in unlisted assets across the sector. The asset write-downs and dash for cash come as the superannuation sector braces for a spate of withdrawals under a government scheme that lets members who have seen their incomes drop to access up to A$20,000 in super before retirement.

Source: Sydney Morning Herald

AustralianSuper will cut the salaries of its executive team and board members by 20% for the next six months. The pandemic-related adjustment means a A$100,000 decline in salary for chief executive Ian Silk, who earned about A$1 million ($607,300) in 2019.

Chief investment officer Mark Delaney was AustralianSuper's highest-paid executive last year, with total remuneration of A$1.6 million. He can expect a 20% cut to his fixed remuneration of A$765,800 for the next six months.

Source: Australian Financial Review

INDIA

IndusInd Bank and its promoter Hinduja Group have initiated talks with sovereign wealth funds, including Singapore’s GIC, and pension funds to raise as much as $500 million to boost investor confidence as the private lender’s balance sheet has deteriorated.

“IndusInd Bank has been one of the most impacted banks in the Covid-19 market rout. With promoter shareholding almost close to the maximum cap defined by the Reserve Bank of India, they have to bring in external investors to pump in capital. The group is in talks with deep pocketed investors who can help bring in capital and also assuage market concerns," said a person requesting anonymity as the talks are private.

Source: Live Mint

JAPAN

The Government Pension Investment Fund (GPIF) took a ¥‎18 trillion ($166 billion) loss during the first quarter of the year according to an estimate by Nomura Securities, pointing to a record in quarterly red ink caused by higher exposure to the coronavirus-influenced equity market.

The loss would erase the ¥‎9.42 trillion earned in the first three quarters of the fund's fiscal year, which ends March 31, bringing the total result for that year to a negative ¥‎8.6 trillion – its first annual loss in four years.

Overseas stock investments were the largest source of the loss, contributing to ¥‎10.6 trillion in red ink, said Masahiro Nishikawa, chief fiscal policy analyst at Nomura Securities. Japanese equities lost an estimated ¥‎7.6 trillion, while domestic bonds were off by ¥‎100 billion. Foreign bonds produced ¥‎300 billion in earnings.

Source: Nikkei Asian Review

Investors with nearly $200 billion in assets holding shares in Japan’s Mizuho Financial Group say they plan to back a shareholder motion urging the bank to cut its lending for coal and other fossil fuels.

In an unusual showing of hands weeks before Mizuho’s annual general meeting in June, Norway’s largest pension fund and life insurance company, Kommunal Landspensjonskasse (KLP), Storebrand ASA and Denmark’s MP Pension said they would support Japan’s first climate change resolution.

It marks the first time a Japanese publicly traded company has faced a shareholder climate change resolution.

Source: Reuters

KOREA

The National Pension Service (NPS) committed about W1 trillion ($810 million) to four global hedge fund houses in 2019, marking its first investments to single-manager hedge funds.

For the new mandate, it picked London-based Marshall Wace and three US fund houses – Crabel Capital Management, Pentwater Capital Management and Waterfall Asset Management – in the fourth quarter of last year, NPS said on April 2.

NPS declined to disclose the specific amount allocated to each fund house and how much of the committed capital has been called in so far.

Source: Korean Investors

Concerns are growing over Korean life insurers, which appear to be facing similar circumstances to those that caused seven Japanese life insurers to go bankrupt two decades ago.

While a combination of factors drove the seven mid-sized Japanese life insurers and one non-life insurer into bankruptcy between 1997 and 2001, reverse margins based on lowered interest rates was a dominant factor.

Source: Korea Times

A number of South Korean pension funds are looking to hunt for bargains in the battered equity and bond markets, while postponing investment in infrastructure and private equity and debt funds on rising default risks.

As mark to market losses led to a sharp fall in the proportion of equities and bonds of their portfolios, the Korean Teachers’ Credit Union and the Public Officials Benefit Association are looking to put their cash hoard into the traditional asset markets, according to sources.

The Dow Jones Industrial Avearge is down 24% since the beginning of this year while the benchmark Kospi has lost 25% from a peak hit in late January, due to the impact of the coronavirus outbreak.

Source: Korean Investors

Pension schemes and savings funds in South Korea are busy responding to a flood of capital calls simultaneously from foreign investment firms which are cutting their reliance on bank loans for deal financing amid increased market volatility.

To meet the massive capital calls from private equity funds to real estate and infrastructure investment funds, the Korean limited partners are required to attend a series of conference calls and prepare the paperwork, according to investment banking sources on April 2.

Source: Korean Investors

Prudential Financial and the lead underwriter Goldman Sachs are expected to choose the preferred bidder for the Prudential Life Insurance Company of Korea this week at the earliest, according to industry sources and media reports.

The sources said that KB Financial Group, Taiwan's Fubon Financial and three private equity firms ― MBK Partners, Hahn & Company and IMM Private Equity ― took part in the main bid in March.

Among them, KB Financial Group has been mentioned as the strongest candidate to take over the US insurance giant's Korean unit.

Source: Korea Times

The Teachers’ Pension named former senior education ministry official Myung-hyun Ju as its chief executive officer for a three-year term, starting on April 1.

Ju had served as assistant minister for planning and coordination of the ministry and its spokesman since joining the public service in 1981, the pension fund said.

Source: Korean Investors

MALAYSIA

Malaysia’s sovereign wealth fund Khazanah Nasional named the country’s prime minister, Muhyiddin Yassin, as its new chairman. He replaced former prime minister Mahathir Mohamad, who was appointed as chairman in July last year and has stepped down from his role and as member of the board, effective March 25.

Finance minister Zafrul Tengku Abdul Aziz and Khazanah’s ex-director Mohammed Azlan Hashim have also been appointed as members of the sovereign fund board, according to a statement on April 1.

Source: Khazanah

Khazanah Nasional may provide up to RM10 billion ($2.29 billion) in financial assistance to Malaysia’s airlines in the form of loans guaranteed by the sovereign fund to help them cope with the Covid-19 pandemic.

It is meant as a short-term relief for them to cover operating costs and improve liquidity, a source told the New Straits Times. He said the government’s intervention via Khazanah would be critical at this juncture to assist local airlines such as Malaysia Airlines, AirAsia, Firefly and Malindo Air.

Source: New Straits Times

SINGAPORE

Singapore’s state fund GIC and Dexus are buying a half share of the Rialto Melbourne complex in a new joint venture from Kuwait’s St Martins Property for $644 million.

Dexus chief executive, Darren Steinberg, said, “We are pleased to continue to grow our relationship with GIC, enabling them to extend their investments into the Australian office market. In the current environment, we are focused on business continuity, and pleasingly were able to close this off-market transaction within our targeted timeframes.”

Source: Property Observer

GIC appointed Glenn Hutchins, chairman of North Island and co-founder of Silver Lake, to its International Advisory Board (IAB), effective April 1, 2020.

Hutchins will be an advisor to the Investment Strategies Committee and a member of the Investment Board.

The IAB provides GIC’s board, board committees and management with global and regional perspectives on geopolitical, economic and market developments.

Source: Deal Street Asia

TAIWAN

The Bureau of Labor Funds (BLF) appointed eight managers for its NT$64 billion ($2.11 billion) domestic absolute return equity mandate.

They are: Taishin Securities Investment Trust, Capital Investment Trust Corp, Cathay Securities Investment Trust, Nomura Asset Management Taiwan, Fuh Hwa Securities Investment Trust, Prudential Financial Securities Investment Trust Enterprise, Uni-President Asset Management Corporation, and Allianz Global Investors Taiwan.

The scope of investment includes Taiwanese stocks traded on the domestic exchange and over-the-counter market, local equity exchange-traded funds, and domestic corporate and government bonds. Interested fund managers need to achieve an investment return of 200 basis points above the average year-end dividend yields on the Taiwan Stock Exchange's main board stocks over the last five years. 

Source: Asia Asset Management

INTERNATIONAL (EXCLUDING ASIA)

The biggest US corporate pension plans have seen their investment returns fall by 7% on average in the first quarter alone amid the market turmoil sparked by the Covid-19 outbreak, estimates Willis Towers Watson.

The funded status of these plans fell by eight percentage points to 79% during the first quarter of 2020, its lowest level since 2012, according to WTW’s analysis of 376 Fortune 1000 companies that sponsor US defined benefit pension plans.

Pension plan assets fell to $1.4 trillion as of March 31 from $1.52 trillion at the end of 2019, the report found.

Source: Willis Towers Watson