Insto roundup: NPS, KIC target hedge funds; China insurer equity shift

AUSTRALIA

Sam Sicilia, chief investment officer for Hostplus, said institutional investors should ramp up their exposure to equities as Australian shares are undervalued and price-to-earnings (P/E) multiples will rise.

He said equities are “currently very, very cheap,” and that investors will pay more for scarce company earnings, potentially pushing the P/E multiples of Australian shares over 30 times.

He added that inflation is unlikely amid low growth and corporate profits in Australia, along with the ongoing technology trends that are “massively deflationary”, after the Reserve Bank of Australia lowered its near-term inflation forecast to 1.7% this year from 2%.

Source: Investment Magazine

Queensland Investment Corporation (QIC) and Superloop were not able to reach a takeover deal and have ended the exclusivity negotiation period.

Superloop said in a statement to the Australian Securities Exchange that it had received an original offer from QIC on April 2 to purchase the company at AU$1.90 a share, before it was upped to AU$1.95 on April 26. “The board in discussions with QIC have been unable to agree to a transaction and on that basis, the parties have decided to discontinue the period of exclusivity,” noted a statement from Superloop to the Australian Securities Exchange.

Superloop added in the statement that it was “in the best interest of Superloop shareholders to engage with QIC and provide them with a limited period of exclusivity to conduct due dilligence in order to establish whether an acceptable binding transaction could be agreed”. Its revenue has more than doubled to A$125.2 million ($85.91 million) for the financial year of 2018.

Source: ZD Net

Australian superannuation funds are projected to own 60% of all listed equities on the ASX by 2033, according to findings of research firm Rainmaker Information.

The study said that superananuation funds currently hold A$700 billion ($480.34 billion) in domestic shares listed on ASX, accounting for close to 40% of the index. It predicted that, with weekly inflows of A$3 billion, a third of that amount will be allocated to listed Australian companies by superannuation funds.

“With this share growing roughly one percentage point per year, in 10 years it will be 50% and in 20 years ownership levels could be 60%,” said Alex Dunnin, executive director of research at Rainmaker, adding that the growth is faster than the growth of the exchange’s market capitalisation.

Source: IPE

Superannuation funds’ performance might struggle to match the average annual compound returns of 8.5% in the past seven years, despite a swift recovery from last year’s losses resulted from market volatility and a softening economic outlook.

A typical balanced super investment option returned 5.3% in the 10 months ended April 30, according to fund research company SuperRatings. Kirby Rappell, executive director of the research firm, said that risks, including weak inflation, tigher credit conditions and geopolitical tensions, might hamper gains and pose near-term uncertainty.

Source: The Sunday Morning Herald

CHINA

The China Banking and Insurance Regulatory Commission is studying a proposal to raise the upper limit of insurance funds’ equity investment, which is currently set at 30%, the Securities Times reported, citing undisclosed sources.

According to industry estimates, if the proportion of investment in equity assets increases by 10 percentage points, it will bring trillions of funds to the equity market, giving a substantial boost to the stock market and will a strong support to the real economy. 
 
As of the end of the first quarter of this year, 12.39% of the Rmb17.06 trillion insurance funds is now invested in equities and securities investment funds. 

Source: Securities Times

ICBC Axa’s asset management arm was officially opened in Shanghai on May 16, becoming the asset management subsidiary owned by a joint-venture insurer that set up itself after obtaining approval from the regulator.  

JAPAN

Hiromichi Mizuno, chief investment officer at Japan’s $1.4-trillion Government Pension Investment Fund (GPIF), said Asia will be able to catch up and get on the learning curve when it comes to responsible investment.

“I want to see more AI used by the industry. AI will drive humans to focus on more value-added tasks, such as ESG investing, which requires value judgement. Many young people at GPIF now want to work on ESG because they know that it is an area where human wisdom will prevail,” said Mizuno at the recently-held IMAS-Bloomberg Investment Conference in Singapore.

As environmental, social and governance (ESG) investments are increasingly gaining prominence among asset managers across the world (particularly in the West), corporations in Asia are considering broader adoption of ESG-focused principles.

Source: Dealstreet Asia

Dutch insurer Aegon has agreed to sell its 50% stake in a variable annuity joint ventures in Japan for total cash proceeds of approximately €130m (£114m, $145m) to its partner Sony Life.

Aegon Sony Life Insurance is a life insurance company that was founded in December 2009 as a joint venture between Aegon and Sony Life. This deal is likely to be completed by the end of 2019.

Source: Press release, International Adviser

Japan insurer Nippon Life neared a ¥‎70 billion ($635 million) with debt-laden partner Reliance Capital to take control of India's fifth-largest asset manager, Reliance Nippon Life Asset Management. The Japanese insurer is set to acquire a majority of Reliance Capital’s 43% stake in the company to increase its stake to 70%.

In February, Reliance Capital had offered to offload its entire 42.88% stake in the insurance joint venture to the Japanese partner. Until March 2019, both Reliance Capital and Nippon Life Insurance Company held 42.88% each in Reliance Nippon Life Asset Management.

Source: Nikkei Asian Review, India Times

Japan Post Holdings will partner with Daiwa Securities Group to create new investment products, seeking additional fee revenue for its banking unit to shore up profits eroded by years of low interest rates.

Under an agreement to be announced, Japan Post Bank and Daiwa Securities will work together to develop mutual fund wraps, which are accounts managed by a financial institution based on customers’ investment goals. These products — a first for the bank — will be marketed at 233 directly operated Japan Post Bank branches and more than 1,500 large post offices. The bank will apply for government approval as early as autumn, aiming to begin sales in 2021.

Japan Post Group made a sharp break from its decade-plus relationship with Nomura Holdings when it announced on May 15 that it would form a mutual fund tie-up with rival Daiwa Securities Group, leading some to suspect that a failed deal to takeover a real estate unit in 2017 had soured their relationship.

Source: Nikkei Asian Review, Post & Parcel

KOREA

The National Pension Service (NPS) will allocate W2 trillion ($2 billion) to single-manager hedge funds this year in its first direct investment in hedge funds, CIO Ahn Hyo-joon said at an event in Seoul last week. Sovereign wealth fund Korea Investment Corporation is also boosting its hedge fund exposure.

Ahn’s remark came shortly after the South Korean government broadened the investment scope for the $570 billion pension fund. NPS’s hedge fund portfolio comprises of only two funds of funds to which it committed a total of $1 billion in 2016.

Separately, KIC will increase hedge fund investment three years after it had shied away from investing in them due to their poor returns and high fees, its CIO Shinwoo Kang said at the same event. Currently, hedge funds make up 3.5% of KIC’s portfolio, worth $5 billion in net asset value.

Source: Korean Investors

KIC will also raise the proportion of alternative investments with further diversified portfolios to 20% within the next two to three years, KIC’s CEO Choi Heenam said at the same event last week. Currently, alternative assets make up 16% of KIC’s assets of over $100 billion.

The move is announced as KIC is seeking to manage part of two major national cooperatives’ investment assets in addition to Korea Post’s. The sovereign wealth fund has signed memoranda of understanding with the National Agricultural Cooperative Federation and National Federation of Fisheries Cooperatives this week to cooperate in co-investment and to manage part of their assets.

Source: Korean Investors

South Korea’s top life insurer Samsung Life Insurance saw its first-quarter net profit gain 14.7% from a year earlier thanks to stable insurance profit and increased investment margin.

Samsung Life’s net profit for the first quarter ended March reached W447.3 billion ($376.1 million) on a consolidated basis, according to the company’s regulatory filing released on May 15. Operating profit rose 2% on year to W563.9 billion on revenue of W8.2 trillion won, up 4%.

The company’s investment yield increased 0.1 percentage point to 3.9%, or W2 trillion in investment income after the W152 billion gain from asset sales was reflected. Its total assets amounted to W296.7 trillion, up 4.7% from the same period a year earlier.

Source: Maeil Business News Korea

MALAYSIA

The US will return $196 million to Malaysia from seized assets during an investigation into the theft of $4.5 billion from state investment fund 1Malaysia Development Berhad (1MDB).

Tommy Thomas, Malaysia’s attorney general, said the country had already received its first tranche of returned funds under the US Department of Justice’s (DoJ) Kleptocracy Asset Recovery Initiative, which totalled around $57 million. The amount forfeited came from Red Granite Pictures, a US-based film production company linked to former Malaysian prime minister Najib Razak and his stepson Riza Aziz.

Thomas said the DoJ is in the process of remitting another $139 million, which came from the sale of a stake in Manhattan’s Park Lane Hotel that was owned by Malaysian financier Jho Low.

Source: Chief Investment Officer

SINGAPORE

Deputy prime minister and finance Minister Heng Swee Keat claimed he has never interfered in investment decisions taken by Temasek Holdings or GIC, because doing so would undermine his ability to hold them accountable for their performance.

Speaking to Swiss newspaper Neue Zürcher Zeitung, Heng said the government had always had a hands-of role on what countries or sectors the funds should invest in. "If the Board and CEO are not doing a good job, I have the duty to remove them and to change, but I do not micro-manage how they do it."

Heng was responding to a question on how the Singapore government prevents crony capitalism from taking root here, given how the People's Action Party has been in power since independence.

Source: Straits Times

GIC took a punt on Houston, US-based wster company WaterBridge Resources, buying a 20% stake in the firm that pegs its total value at $2.8 billion, according to a source familiar with the deal. 

The Singaporean sovereign wealth fund bought the stake from Fivepoint Energy, a Texas-based investment firm that started WaterBridge in 2016 with $200 million in seed capital. The firm and some of its executives sold the shares to GIC.  

Under the terms of the transaction, GIC and Five Point Energy have committed to a framework to provide incremental equity capital to facilitate WaterBridge’s current pipeline of accretive acquisition and organic growth opportunities. The investment dovetails with GIC’s primary strategy of directly investing in operating infrastructure assets that have high cash flow visibility and provide a hedge against inflation.

Source: Wall Street Journal, DealStreetAsia

GIC also signed an investment framework worth INR40 billion ($600 million) with Indian Hotels Company, the operator of Taj luxury hotels, to acquire hotels in India.

"The capital platform will be used to acquire fully operational hotels mainly in the luxury, upper upscale and upscale segments in India," Indian Hotels said in a stock-exchange filing.

GIC will contribute 70% of money to the investment platform while Indian Hotels will chip in with the remaining amount over a period of three years, the Tata group company said. Indian Hotels will manage the hotels acquired within the framework under its marquee brands.  

Source: VCCircle

SRI LANKA

The largest pension fund of Sri Lanka bought shares in a locally listed mobile company Dialog Axiata during the week of May 13 as part of an apparent effort to breath life into a stock market that has suffered consecutive slumps following the terrorist attacks on April 21.

The Employees Provident Fund (EPF), a LKR2.3 trillion ($13.07 billion) fund, "has bought shares in one company last week," Sri Lanka’s central bank governor Indrajit Coomaraswamy told reporters. His announcement came as the benchmark Colombo All Share Price Index (ASPI) hit seven year lows.

Analysts said EPF’s entrance is necessary to provide required oxygen for the market, as Sri Lanka's economy continues to suffer from a lack of business confidence and major drops in travel and tourism revenue, following the attacks. 

Source: BIZ

THAILAND

The Government Pension Fund of Thailand is wary of buying more equities because it is uncertain when the current bout of trade hostilities between the US and China will end, but it is still targeting an annual return of over 5% this year.

GPF generated an "excellent return" of about 3% in the first four months of 2019, mainly by raising equities holdings during December and January, said Vitai Ratanakorn, the state money manager’s secretary general. He noted that the trade dispute may affect performance, but that it still aimed to achieve a full-year return of more than 5%. 

The fund reported an investment return of just 0.2% in 2018, its worst year since making a 5.2% loss during the 2008 global financial crisis, said Vitai. But it increased equity and bond holdings early this year, betting on a pause in US rate hikes, which helped it make better returns. 

Source: Bloomberg

INTERNATIONAL

Four Nordic pension plans have between them allocated $700 million to a renewable energy infrastructure fund that will mostly invest in environmental, social and governance (ESG) effortsin Asia and Latin America.

The investors in question are three Danish funds – ATP ($125 billion in size), Laegernes Pension ($134 billion) and PensionDanmark ($35.2 billion) – and Norway’s Kommunal Landspensionkasse ($700 million).

They are pooling their ESG investments in a new vehicle to run the money, the Copenhagen Infrastructure New Markets Fund, which expects the pool to grow to at least $1 billion before it closes in February.

PensionDanmark has committed $250 million so far, and ATP is expected to invest about the same. Laegernes and Kommunal have injected the remaining $200 million.

Source: Chief Investment Officer 

PNO Media, the pension fund for the Netherlands’ creative sector, has chosen Dutch fund house Robeco to manage its Asia-Pacific equity portfolio of around €250 million ($279.24 million).

The integration of environmental, social and governance (ESG) criteria into Robeco’s investment approach was an important factor in PNO’s decision, according to a statement by both firms.

Nelly Altenburg, chair of PNO Media, said: “Sustainability is an increasingly important aspect for us in our commitment to provide a good and responsible pension for employers, members and former members and pensioners.”

Source: Robeco