Insto roundup: Korea insurer merger issues; Investors urge Japan to cut carbon
ASIA PACIFIC
Money managers and institutional investors in Asia Pacific are keeping each other at arm's length in an effort to bring the coronavirus outbreak under control, a trend that could weigh on new business opportunities for managers if it drags on.
Virus epicentre China is no longer a must-visit destination for fund managers, especially given that going there could result in 14-day quarantine. Much of the industry has taken to working from home in hubs such as Hong Kong and Singapore, and many visits to and within Asia have been postponed or cancelled.
Nonetheless, investment mandates are still being handed out, with meetings and fundraising sessions now often being done via videoconference. But Tariq Ahmad, Singapore-based head of Asia at Brandywine Global Investment Management, said the outbreak could potentially depress new business activity in the region over the coming five or six months.
Source: Pensions & Investments
While 94% of central banks in Asia Pacific think their institution should be involved in helping encourage low-carbon financing and green initiatives, only 22% have any strategic investment mandates or approaches to scale up private investment in low-carbon sectors.
These were findings from the South East Asian Central Banks Centre, which polled 18 institutions during the second quarter of 2019 to understand their views on climate and the low-carbon transition.
In addition, just 29% had already issued financing instruments or implemented regulatory policies to encourage private financing for low-carbon investments. Finally, 39% had already trained their staff and external financial services personnel on climate change risks and opportunities.
Source: Official Monetary and Financial Institutions Forum
AUSTRALIA
AustralianSuper is upping its allocation to private equity asset class and looking to underwrite big-ticket deals offshore, after three years of co-underwriting deals locally.
Terry Charalambous, senior portfolio manager at Australia's largest superannuation fund with A$180 billion ($118.6 billion) in assets, said the benefits of a co-underwriting structure included being brought into the deal process much earlier, gaining deeper insight into the investment case and working closely with managers on due diligence.
Charalambous added: “Depending on how large an equity cheque we write, we can also gain governance rights after we acquire the business, including the right to appoint a director.”
Source: Investment Magazine
CHINA
China’s fast-aging population is increasing the pressure on the state pension deficit at the same time as employers are falling behind on their contributions. A deeper economic slowdown could burn a bigger hole in the retirement pot, experts say.
The cumulative balance in the pool stood at about Rmb5 trillion ($712 billion) at the end of 2019, and employers’ contributions were expected to fall short by Rmb417.4 billion following measures to ease the burden on employers, vice finance minister Yu Weiping said. The government will raise its subsidies so that payment can be disbursed to retirees in full on a timely basis, Yu added.
Prime minister Li Keqiang last year cut the employers’ contribution rate to 16% from 20% to cope with challenges as the economy grew at the slowest pace in 20 years. The shortfall suggests the retirement system is unsustainable as the ageing demographic worsens in the coming decades, according to Renee McGowan at Mercer.
Source: South China Morning Post
China Life Insurance approved an investment into the new China Life Aged-care Industry Investment Fund.
The insurer will be the limited partner of the fund while China Life Qiyuan, its indirect wholly-owned subsidiary, will be the general partner. The total initial capital amount of the partnership is Rmb10 billion ($1.42 billion).
The fund will focus on the investment in the aged-care industry, including industrial assets such as continuing care retirement communities, boutique apartments for the aged in urban core areas and community home care services, as well as the upstream and downstream businesses along the aged-care industry chain.
Source: HKEx filings on February 20 and December 19
JAPAN
Investors managing $37 trillion in assets urged Japan to slash its carbon emissions, saying on February 17 that a strong signal from Tokyo could help galvanise international climate action ahead of a UN summit in Glasgow in November.
The groups signing the letter said they included more than 630 investors representing about half of the world’s assets under management. Members of the various groupings include BlackRock, insurer Allianz, BNP Paribas Asset Management and California Public Employees' Retirement System (Calpers).
Institutional investors, traditionally wary of singling out governments for criticism, are starting to subject policymakers to greater public pressure amid mounting fears over the risks that climate change poses to global markets.
Source: Reuters
Japan’s MUFG Bank will invest up to ¥80 billion ($727 million) in Singapore's ride-hailing leader Grab. The two firms will form a partnership to target further growth in Southeast Asia, offering new services such as lending and insurance through smartphone apps.
MUFG will complete its investment by mid-2020, taking a stake of several percent in the ride-hailing company. Japan’s SoftBank Group is a major shareholder in Grab, but MUFG will own the biggest slice among the financial institutions investing in it.
Worth an estimated $14 billion and founded in 2012, Grab is one of Southeast Asia's largest unicorns, or unlisted startups valued at more than $1 billion.
Source: Nikkei Asian Review
KOREA
Korea Development Bank (KDB), hit a snag in its attempt to offload debt-ridden affiliate KDB Life amid a worsening market environment.
Under current regulations, a private equity fund is not allowed to own a financial services firm for more than 10 years. As it acquired the life insurer in March 2010 through a private equity fund that it had set up with Consus Asset Management, KDB will have to pay a fine if it doesn't sell the life insurance company by the end of March. The fund and its subsidiary hold over a 90% stake in the firm.
Source: Korea Times
The Construction Workers Mutual Aid Association has appointed Lee Wihwan as chief investment officer for a two-year term from February 24. A former investment head of Hanwha General Insurance, Lee will succeed Han Jung-su, who resigned for a personal reason at the end of 2019.
The retirement fund had assets under management of W3.8 trillion ($3.2 billion) at the end of September 2019. Fixed income accounted for 60% that, about the same as at end-2018, while the proportion of alternatives rose to 23% from 19%.
Source: Korean Investors
A high-stakes integration plan between Shinhan Life Insurance and Orange Life Insurance is facing headwinds, as their financial holding firm reframes the timeline for the move.
Shinhan Financial Group initially expected it would be able to complete the process before the end of 2021, but it is revisiting the plan. Shinhan planned to run a single life insurance affiliate by integrating Orange Life into Shinhan Life after signing a deal to acquire the firm from private equity firm MBK Partners in 2018.
Source: Korea Times
MALAYSIA
The Employees Provident Fund (EPF) announced its 2019 dividend for the conventional savings fund and Simpanan Shariah (its sharia-compliant fund), which respectively stood at 5.45% and 5%.
EPF’s overall investment assets grew to RM924.75 billion ($218.9 billion) due to 2.8% growth in its membership to 14.6 million, while its registered employer base expanded by 3% to 522,300 employers.
However, this is the lowest dividend rate for the conventional savings plan declared by the pension fund since 2008. EPF chief executive Alizakri Alias said that, as anticipated, there was substantially more volatility in 2019 than the previous year.
“There were three rate cuts made by the US Federal Reserve, the US-China trade spat escalated and continues to be unresolved, and there were surrounding the Brexit negotiations," he added. "On top of this, we did not expect the Hong Kong protests to be prolonged and that certainly added pressure on an already fragile far-east market."
The Securities Commission (SC) has announced liberalisation measures for private retirement schemes (PRS) to provide more flexibility in asset allocations.
These include allowing conservative funds to invest in foreign markets and exchange-traded funds based on physical gold to increase asset diversification into alternative investments.
Source: New Straits Times
The Malaysian Trades Union Congress (MTUC) hopes the country's EPF can invest abroad more aggressively to offset any downturn in the Malaysian economy.
MTUC president Abdul Halim Mansor said returns from investments abroad had contributed positively to the fund and enabled it to announce satisfactory dividends for 2019 despite the economic environment.
“In this context, MTUC is confident that the EPF will scrutinise and, if needed, make improvements to its internal processes and procedures to approve investments locally and abroad to maximise returns for better dividends,” he said in a statement.
Source: Malaysiakini
SINGAPORE
Singapore’s sovereign wealth fund GIC and Hong Kong-based real estate company Edward Wong Development Company (EWD) are planning to sell over 40% stakes in Shanghai-based Chongbang Group.
The sale of the interests is believed to have been marketed since the end of last year. GIC declined to comment while EWD and Chongbang did not respond to queries by press time.
Source: PERE
INTERNATIONAL (EXCLUDING ASIA)
Ontario Municipal Employees’ Retirement System (Omers) posted a return of 11.9% last year, up from 2.3% in 2018, reflecting a similar performance trajectory for Canada’s defined-benefit pension industry as a whole.
Canadian DB pension plans returned 14% in 2019, the second-highest annual return in the past 10 years, thanks to a surge in Canadian and global equity markets, according to a report by RBC Investor & Treasury Services. That came after they lost 0.7% the year before.
In the three, five and 10 years to end-2019, respectively, Omers returned 8.5%, 8.5% and 8.2%
Source: Omers; Chief Investment Officer