Insto roundup: GPIF eyes private debt; Dutch get RQFII quota

GPIF seeks information on private debt; GIC buys Julius Baer stake; Holland gets Rmb50bn in RQFII quota; Korean insurers' hedging woes rising; GEPS' new PE and RE plans; investor pressure rising on Japanese corporates; and more.
Insto roundup: GPIF eyes private debt; Dutch get RQFII quota


Sunsuper, one of Australia’s biggest pension plans, is determined to stay ahead of an increasingly intense competition in the superannuation industry, which saw a wave of fund consolidation with the aim of cutting fees and boosting returns.

The A$66 billion ($46 billion) fund will be boosting its marketing capabilities to financial planners following the recent announcement of the departure of chief executive Scott Hartley.

“The future of the Australian superannuation landscape is going to be defined by stronger retail competitive forces,” said Andrew Fraser, chairman of Sunsuper.

Source: Deal Street AsiaBloomberg

The Australian Prudential Regulation Authority (Apra) said on June 5 that it had begun talks with local health insurers on potential mergers as the premiums of these insurance become less affordable.

“Apra has already commenced bilateral discussions with a number of insurers who we have identified as the most likely to face sustainability challenges,” said Peter Kohlhagen, head of insurance policy development at Apra.

Source: The Sydney Morning Herald


The Renminbi Qualified Foreign Institutional Investor (RQFII) scheme has been extended to the Netherlands, with the country's investment quota set at Rmb50 billion ($7.21 billion), according to the People’s Bank of China.

This can help to broaden foreign institutional investors’ channels to allocate in renminbi assets and further open up the domestic capital market, the central bank said. The RQFII scheme allows direct foreign investment into onshore Chinese securities. 

Source: People’s Bank of China


Indian renewable energy project developer Greenko Energy Holdings has agreed to raise $495 million from units of two sovereign wealth funds, Abu Dhabi Investment Authority and Singapore's GIC.

GIC will continue to be Greenko’s majority shareholder, the Indian company said. The equity commitments are for two hydro-storage energy projects in southern India that are expected to be completed and operational in 2022. The projects will have an overall capital outlay of $2 billion, according to Greenko.

Source: The Economic TimesGreenko


The Government Pension Investment Fund (GPIF) has put out a request for information (RFI) on private debt research, with a deadline of June 28.

GPIF describes the background as a part of the world’s largest retirement fund’s studies of a wide range of “new investable assets from a view point of pension reserve fund management so as to contribute to the benefits of the insured”.

As part of the RFI, GPIF will request information on private debt, such as privately-placed bond, bank loan, direct lending, real estate non-recourse loan and infrastructure debt, “and suggestions on subsequent research we may conduct”.

Source: GPIF


Hotel chain Hilton has signed an agreement to manage a 600-room hotel in Melbourne, Australia with Yarra Park City, a venture between Malaysia's Employees Provident Fund (EPF) and OSK Property Holdings. 

Hilton manage the Hilton Melbourne Square, construction of which is due to start next year, and the opening is expected in early 2023. EPF had bought a 49% stake in Yarra Park City for A$154 million ($107.32 million) in April 2017. 

The investment in the Melbourne project is the fund’s second international real estate venture after its Battersea project in London.

Source: WebWireHiltonIPE InternationalReuters


Aurora Ignacio

The Philippines’ state-run Social Security System is tasking local fund managers with PHP7 billion ($134.4 million) out of its ‘investment reserve fund’ to diversify its portfolio and improve returns.

President and chief executive Aurora Ignacio said the pension fund is hiring five managers to invest in equity funds, balanced funds and fixed-income funds.

The SSS initially sought bids to administer PHP9 billion in funds, but decided to deploy a lower amount.

Source: Philstar


Singaporean state fund Temasek and Chinese tech giant Tencent Holdings are investing $35 million in London’s TrueLayer. 

The Series C round will help the provider of open banking platform services develop new financial applications, TrueLayer said. The latest round of funding means it has externally sourced $46.8 million over four rounds.

Source: Bloomberg, Crunchbase

Singapore’s GIC has bought a 3.09% stake in Julius Baer, joining fund houses Blackrock and Wellington Management among the Swiss wealth manager's top shareholders. 

The announcement will likely ease pressure on Julius Baer chief executive Bernhard Hodler, who has been trying to stem outflows from the firm’s balance sheet and return it to financial health.

GIC previously owned a large stake in Julius Baer’s Swiss bank rival UBS after buying a set of debt instruments from the bank during the global financial crisis of 2008 and converting them to equity. It sold most of this stake about two years ago.

Source: Bloomberg, The Financial Times


Kyobo Life Insurance's chairman and chief executive, Shin Chang-jae, is facing mounting pressures from investors seeking to exercise a put option to withdraw their capital from the firm.

A put option is a stock market device that gives the owner the right to sell an asset at a specified price by a predetermined date to a given party.

Of the insurer's investors, a consortium led by Hong Kong-based Affinity Equity Partners submitted an application for arbitration against Shin with the International Chamber of Commerce last year to exercise the put option, since the insurer has yet to go public after years of delay.

Source: Korea Times

The Government Employees Pension Service (GEPS) will ramp up global private equity secondaries investment and focus real estate investment on easy-to-trade office buildings in developed countries, its new chief investment officer said, as the South Korean pension fund puts a priority on securing liquidity.

With an investment horizon of five to seven years, the $8.7 billion pension scheme targets assets for annual returns of 6% to 7%, CIO Seo Won-joo said, having taken up the role last month.

Unlike other major South Korean pension funds, whose assets continue to increase, GEPS finds it difficult to invest in real estate, infrastructure and private equity funds with terms of about 10 years because of shortfalls in its balance sheet.

Source: Korean Investors

South Korean insurance firms are facing a challenge from a rise in foreign exchange hedging costs. The cost attributable to the interest rate differential between the US and South Korea is likely to lead to a big decline in asset management profit.

The Korea Life Insurance Association said on June 3 that South Korean life insurers’ investment in foreign-currency marketable securities exceeded W100 trillion ($8.4 billion) in March this year, having more than doubled from W48 trillion in 2015. It now stands at more than three times the amount invested in such assets by their non-life counterparts. 

Such overseas investment expansion is inevitable in that the domestic insurance market is already saturated and life insurers need to diversify their asset portfolios. The problem is that they have to bear FX hedging costs to avoid currency fluctuation risks. US interest rates topped those of South Korea last year, causing a negative swap point and an increase in FX hedging costs.

Source: Business Korea

The Korean Teachers’ Credit Union (KTCU) and Meritz Fire & Marine Insurance have invested $100 million in a mezzanine loan secured by 92 budget hotels of a US real estate investment trust company that closed a $1.04 billion debt refinancing on the properties in May.

Meritz Alternative Investment Management, an affiliate of Meritz Fire, arranged the investment in the mortgage loan for a target return of 7% per year, according to sources with knowledge of the matter on June 6.

The underlying assets include no-frills hotels of Hilton, Marriott and Hyatt brands owned by unlisted Hospitality Investors Trust. Because budget hotels are less vulnerable to economic cycles than luxury hotels, the South Korean investors expect to earn stable interest incomes from the loan and see no problems with debt collection.

Source: Korean Investors


With Japan’s annual shareholders' meetings season coming up this month, institutional investors are ramping up pressure on companies to appoint more and better external directors and demanding more action on corporate governance and stock buybacks.

A record 54 companies have received shareholder proposals ahead of annual meetings this year as of June 7, up from 12 for the whole of 2018, according to data compiled by IR Japan. The investors in question include various US asset managers.

Japanese companies often promote their board members from within, which can undermine governance and dampen earnings by preventing them from realising their full potential. 

Source: Nikkei Asian Review (from two stories, one on record investor proposals and another on external director appointments)

Most asset owners globally now employ smart beta strategies, after a jump in the use of such products – especially those with multi-factor underlyings – since last year, FTSE Russell research indicates.

This year’s smart beta survey by the index provider showed that 58% of institutional investors have implemented smart beta strategies, up from 48% in 2018 (see graph below). And use of multi-factor strategies leapt to 71% from 49% in 2018 and more than trebling since 2015. 

(Click for full view; Source FTSE Russell)

Meanwhile, the number of institutions adopting smart beta in order to save costs has more than doubled between 2014 (15%) and 2019 (31%).

The research, released on June 10, polled 178 asset owners with an estimated total AUM of $5 trillion. One fifth (19%) were in Asia Pacific, 46% in North America, 29% in Europe and 6% in other regions.

Source: FTSE Russell

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