Insto roundup: HK’s MPFA warns on investing returns; NPS and Khazanah see big 2019 gains
AUSTRALIA
Sam Sicilia, investment chief at A$54 billion ($35.4 billion) superannuation fund Hostplus, slammed shareholder activists lobbying for superannuation funds to sell their fossil-fuel assets, saying “divesting mutes you – makes you impotent. You can’t take action against a company”.
Sicilia said Hostplus is sticking with its strategy to engage with “dirty energy” companies while adopting investment strategies that transition to a low-carbon economy. He observed that plans by some of the world’s largest investors to reduce their fossil fuel exposure, were for ideological reasons, adding that “ideology doesn’t stop emissions”. He also said that Hostplus was unwilling to sell out of sectors at the expense of returns.
“Everything we do is directed at members’ retirement benefit ... We are not allowed, and nor do I want to make investments purely because it’s good for the planet.”
Source: Investment Magazine
More than 10,000 Australian academics and university employees signed a petition asking A$85 billion ($55.7 billion) superannuation fund Unisuper to divest from companies they say are incompatible with the Paris climate agreement.
Unisuper, which has 450,000 members, largely working in the tertiary education sector, was revealed to be one of five with billions of dollars invested in the global fossil fuel industry, alongside Hesta, Cbus, AustralianSuper and Hostplus. Unisuper's records show it has almost A$8 billion invested in 14 thermal coal mines and 13 oil and gas companies. The fund previously stated it had no plans to divest from these assets.
"Superannuation is by its nature a long-term project," said bioethics and Melbourne laureate professor Peter Singer. "I would have thought the industry has a particular responsibility to look at that future and say are we contributing to making life better for the members at the time where they will be drawing on the fund?"
Source: Sydney Morning Herald
CHINA
The China Banking and Insurance Regulatory Commission (CBIRC) is in talks to introduce strategic investors into Dajia Insurance, the newly created firm that absorbed assets of Anbang Insurance Group.
The regulator “has basically secured social investors” to establish an appropriate shareholding structure for Dajia, just as it ended a two-year takeover of Anbang on February 22. In addition, all of Anbang’s short-term investment products, totalling Rmb1.5 trillion ($213 billion), were paid back on time in January, it said.
Source: CBIRC
HONG KONG
Hong Kong’s Mandatory Provident Fund Schemes Authority (MPFA) has warned that the HK$970 billion ($122.8 billion) MPF's returns will suffer as a result of the coronavirus outbreak, after it reported a healthy 12.2% gain for last year following a 9.3% loss in 2018.
“We have very challenging investment markets worldwide this year." said Cheng Yan-chee, executive director of MPFA. "The Covid-19 outbreak has affected the investment market worldwide. On Monday [February 24] alone, the US benchmark Dow Jones Industrial Average dropped over 1,000 points and there will be more volatility ahead."
Source: South China Morning Post
INDONESIA
The House of Representatives of Indonesia has called for the Supreme Audit Agency to investigate state-owned insurers on their investment management.
The Members of House Commission VI, which oversees the country’s trade, industry and state-owned enterprises, are targeting state pension insurance fund Taspen and social insurer Asuransi Angkatan Bersenjata Republik Indonesia (Asabri). It aims to prevent these institutions from mismanaging their investments.
Commission VI member Mukhtarudin from the Golkar Party also said on Wednesday (February 19) that the move aimed to prevent the insurers from repeating the mismanagement of ailing state-owned insurer Asuransi Jiwasraya, which led to negative equity and the inability to pay its policyholders’ claims of Rp17 trillion ($1.2 billion).
Source: The Jakarta Post
State-owned insurer Asuransi Jiwasraya lost Rp13 trillion ($949.7 million) from investing in the stocks of companies affiliated with businessmen Heru Hidayat and Benny Tjokrosaputro, said president director Hexana Tri Sasongko.
“The majority of our investment in stocks and equity mutual funds has been impaired and decreased our investment value,” he told the press after a hearing with House of Representatives’ Commission VI overseeing state-owned companies and trade, in Jakarta.
The alleged investment mismanagement has been investigated for corruption after the insurer failed to pay for more than Rp16 trillion worth of matured insurance policies in January.
Source: The Jakarta Post
JAPAN
Nisseikyou Pension Fund (NPF) is sticking with its plan to cut bond holdings, even as fears about the spreading coronavirus sends global debt funds surging toward all-time highs. The ¥96.7 billion ($880 million) fund currently has about 40% of its portfolio in bonds compared to a 35% equivalent in its target benchmark.
Yields are just too low to boost returns and there is still an ongoing need for long-term investors to shift to alternatives such as real estate and infrastructure, according to Shinichiro Shibata, executive director of investment at Nisseikyou Pension Fund, which manages assets for 48,000 employees of a consumers co-operative.
Mounting coronavirus cases across Asia, Europe and the Middle East have sent investors rushing to havens such as sovereign bonds and gold. Japanese investors in particular have piled into overseas bond markets, buying more than ¥3 trillion ($27 billion) of foreign debt in the first two weeks of February, according to data from the finance ministry.
Source: Bloomberg
Four of the seven top investment professionals brought in to bolster Japan Post Bank's $2 trillion portfolio have now left the bank, as the former state-owned giant rolls back plans for a more aggressive investing approach.
The change of strategy around one of the world's largest investment pools raises more questions about the growth prospects of parent Japan Post Holdings, which counts the bank as its main breadwinner. It is already grappling with a policy mis-selling scandal at Japan Post Insurance, while the internet is dampening demand at its traditional postal services division.
Source: Reuters
The Japanese government plans to further loosen restrictions on foreign investors seeking to buy shares in companies related to national security, a person familiar with the matter told Bloomberg. Japan is working on a new rule that would require foreign investors to report in advance when they plan to buy more than 1% of shares in companies in sensitive industries.
Portfolio investing by financial institutions such as asset managers and hedge funds were previously reported to be exempt from the rule, but the person familiar with the matter said such investments by family-run funds, university endowments and corporate pension funds will also be granted special dispensation.
Source: Bloomberg
Large investors were suspected of buying stocks in Japan and China to limit market drops, but the market continued to fall. Stock traders in Tokyo said sharp V-shaped moves bore the fingerprints of large government institutions buying shares to try and lift markets plunged into turmoil by the ongoing impact of the coronavirus.
The key suspect was the Bank of Japan, which already buys an annual ¥6 trillion ($54 billion) of exchange-traded funds to support the market. Some said the Government Pension Investment Fund, the largest pension fund in the world, could also have done so. But other market participants said such a move would be far more unusual.
A trader in China similarly said the so-called 'national team' of state buyers were also suspected of intervening to buy shares after a poor market opening on February 26, as the market strengthened after a weak opening and did not fall in the afternoon trading session.
Source: Financial Times
KOREA
The National Pension Service (NPS) reaped a major investment return in 2019. Its annual rate of return came to 11.31% last year, the highest since the launch of NPS Investment Management (NPSIM) in 1999, followed by 10.39% in 2009 and 10.37% in 2010.
Over the past year, it earned W73.4 trillion ($60.4 billion) return, which is 1.5 times larger than the total yearly contribution from 22 million insurers. As a result, NPS was overseeing W736.7 trillion assets as of end-2019.
As analysed by AsianInvestor, the record run was mainly attributable to a global stock market rally coupled with monetary expansion efforts, which offset external uncertainties from trade feuds, NPSIM said in a statement. By asset class, overseas stocks showed the highest returns at 30.6%, followed by Korean stocks (12.6%), foreign bonds (11.9%) and alternative assets (9.6%).
Source: NPS
NPS also made some big bets on US blue chips and tech giants in the fourth quarter of 2019. The pension fund materially increased positions in AT&T, Facebook, General Electric, and Netflix stock.
NPS disclosed the trades in a form it filed with the Securities and Exchange Commission. The pension’s US-traded equity investments totalled $36.5 billion at the end of 2019.
Source: Barron’s
International investors have begun cutting their holdings in Korea Electric Power Corporation (Kepco) after a lack of progress by the utility reducing carbon emissions. The $548 billion Dutch pension fund APG has sold most of its $60 million stake, while the Church of England is considering divesting before the end of the year if Kepco does not take action, said people familiar with discussions.
Kepco claimed it was not aware of investors pulling out over climate concerns. In January the majority-state-owned power provider said it would focus overseas investments on renewable energy and less emission-intensive gas plants but would also "participate in coal-fired power plants under strict standards in a limited scope". One such investment is in Indonesia.
Source: Financial Times
MBK Partners, Hahn & Company and IMM Private Equity are facing another stumbling block to their ongoing bids to take over Prudential Life Insurance Company of Korea.
The Korea Finance Consumer Federation (KFCF) said February 25 it jointly organised a committee with four other consumer groups to oppose the private equity firms that are trying to acquire the US insurance giant's Korean unit.
The KFCF urged the Financial Services Commission to bar the PE firms – which the civic group defined as "vulture funds" interested only in profits – from holding a controlling stake in an insurance company.
Source: Korea Times
A consortium of KKR and two South Korean companies closed the acquisition of a Seoul office tower from NPS for an estimated W500 billion ($413 million), in a value-add investment in the 42-year-old building.
The purchase of Namsan Square in central Seoul marked KKR’s fourth real estate investment in South Korea, two of which it had already exited, including a logistics center development, according to KKR on Feb. 28.
NPS has reaped capital gains of about W180 billion won from the transaction in a decade. It had acquired the property for W315 billion from Macquarie in 2009, which also generated proceeds of W100 billion for the Australian bank.
Source: Korean Investors
MALAYSIA
The Malaysian government has reduced the minimum contribution rate for employees from 11% to 7% to stimulate the economy dented by the coronavirus outbreak.
“The new rate will be effective starting April 1, 2020, until the end of the year and affects members below age 60. For those aged 60 and above, the employees’ share of the contribution rate will remain at 0%,” the pension fund said.
The EPF said employees could also opt to keep their current contribution of 11% by completing a form available on its website; it must be presented to employers to be submitted to the EPF.
Source: The Malaysian Reserve
Khazanah has posted profits of around RM7.36 billion ($1.75 billion) for the financial year of 2019, a swift turnaround from the RM6.27 billion ($1.49 billion) losses it suffered in 2018.
The sovereign wealth fund said on March 2 that it posted record profits from operations, which it attributed to higher divestment gains and lower impairments, and robust portfolio returns.
Khazanah’s managing director, Shahril Ridza Ridzuan, said: “Our 2019 performance was achieved against a backdrop of uncertainties in the global landscape, which saw a prolonged Brexit process as well as the heightening of the US-China trade war. This was made more challenging by the continued low-returns environment and generally slower economic growth. Despite these challenges, we managed to achieve significant progress in delivering on our mandate to grow Malaysia’s long-term wealth.”
Source: The Star
NEW ZEALAND
New Zealand Superannuation Fund added three managers since July 1 and terminated one, according to a February 21 filing.
The filing noted that the NZ$45 billion ($28.5 billion) sovereign wealth fund hired Rotterdam-based Robeco to manage a custom index for multifactor equities. A spokesman said the firm was hired during the fourth quarter. In addition, it awarded hired Hillwood Development to manage a North American real estate allocation through the Texas-based firm's US Industrial Club V vehicle, and New York-based Carlyle Group to manage diversified life and non-life insurance strategies, for unspecified amounts.
The New Zealand government decided that KiwiSaver funds will not be allowed to invest in fossil fuels, landmines and illegal weapons in line with the desires of its citizens. The policy, which will be enacted from July 2021, will require ethical standards for default KiwiSaver funds to protect those who do not make a specific choice of fund when they sign up for the system.
The decision was taken by the government following consultations with groups such as climate activist group 350 Aotearoa, charity Mindful Money and financial services firms. Research by Mindful Money found NZ$1.6 billion ($1 billion) of KiwiSaver funds were invested in companies that were engaged in fossil fuel production. Less than 3% of KiwiSaver investments were so far in funds that excluded fossil fuels.
The Petroleum Exploration and Production Association of New Zealand opposed the move, claiming it would "make New Zealanders poorer in retirement and do nothing for climate change".
Source: Money Management, Newshub
SINGAPORE
Singapore state investor Temasek has furthered the talk with Indian authorities to acquire a controlling stake in the cash-strapped Lakshmi Vilas Bank (LVB).
According to people aware of the development, Temasek has approached the corporate affairs and finance ministries for their approval to buy a 51% stake, which will give it controlling rights in LVB.
Source: Business Standard
GIC’s chief risk officer, Chai Tai Tee, will retire at the end of March, the sovereign fund said, and the role will be filled by his deputy Jin Yuen Yee. Jin will take over and joined the group of executive committee on April 1.
In addition, three chief investment officers, Choo Yong Cheen, Liew Tzu Mi and Bryan Yeowill, also join the committee.
Chia has been with the fund for 26 years, and will step down to pursue other interests. He will serve as adviser to GIC until June 30 to facilitate the handover Jin. Jin will oversee the group’s risk policy implementation and management risks in investments and operations.
Source: The Straits Times
Temasek will be freezing the salaries and promotion increments of its staff starting April to help raise funds for people impacted by the coronavirus outbreak.
Senior management, including managing directors and above, can take a base salary cut of up to 5% voluntarily for up to a year.
The investor said the budget set aside for salary increments will be donated to T-Touch, a staff-driven group, to support communities locally and abroad. The funds saved from the voluntary pay-cut of the senior management will be donated to the group and matched dollar-for-dollar by Temasek.
Sources: The Straits Times; Pensions & Investments
INTERNATIONAL (EXCLUDING ASIA)
Oxford Properties, the real estate arm of Ontario Municipal Employees’ Retirement System (Omers), aims to more than double its Asia-Pacific allocation to between 15% and 20% over the next five to 10 years from 7% of its C$60 billion ($41.3 billion) now.
“India is a high priority for us in 2020,” said David Matheson, managing director for Asia-Pacific at Oxford Properties, which had entered the region by buying the Investa Office Fund in Australia in 2018.
Oxford’s Singapore-based team is doing due diligence on several assets in India and expects to close its first transaction there in the coming months.
Source: I&PE Real Assets
Some US public pension plans systematically pay more fees than others when investing in the same private equity fund, leading to a large variation in their net-of-fee performance, according to research by the universities of Harvard and Stanford.
In aggregate, the differences imply that the pensions in the sample would have earned $45 billion more – equivalent to $8.50 more per $100 invested – had they each received the best observed terms in their respective funds.
Source: Social Science Research Network (SSRN)
Leading US private equity executives have defended Ben Meng, chief investment officer of the California Public Employees Retirement System, against calls by Republican senator Jim Banks that Meng should be fired because of his links to China.
“This type of attack on an accomplished American citizen is unwarranted,” said Stephen Schwarzman, chief executive of Blackstone and one of President Trump’s closest Wall Street allies. “Ben is a talented investor who has done a tremendous job for the pensioners.”
Oaktree Capital founder Howard Marks said he had known Meng for a decade and was particularly outraged when he saw Banks attack Meng on Fox News. “It goes against American values to impugn someone’s character on the basis of their family’s national origin,” Marks said.
Source: Los Angeles Times
UK investors poured cold water on an aspiration by hedge fund Third Point to double Prudential’s valuation by breaking up the British insurer following the latter’s demerger in October last year.
The US hedge fund had said it had taken a 5% stake in Prudential and argued that the company should shut its UK head office and separate the Asian business from the US operation, Jackson. Doing that, it said, could double the value of the company over three years.
But one top-20 shareholder said: “As a matter of principle we are not fans of companies delisting from the UK to chase the dream of rebased valuations on foreign exchanges." Another institutional investor added: “Simply separating the Asian business isn’t likely to be sufficient to drive a re-rating, unless the hope is it could attract bidders – an outcome that isn’t necessarily a top priority for long-term investors.”
Source: Financial Times