Insto roundup: NZ Super, Future Fund’s return fears; Temasek targets renewables
AUSTRALIA
The Future Fund posted its latest quarterly return, which revealed a 10-year return on investments of 10% and one-year returns of 11.3%, raising its overall assets under management to A$165.7 billion ($113.98 billion).
However, chairman Peter Costello warned that the sovereign wealth fund's future returns could dip below this level. ‘Looking to the longer-term, the global economy remains challenged by factors including demographics and debt levels. Adding to this, prospective long-term returns remain lower than in recent years," he said in a press release.
Source: Future Fund
Cash inflows to the leading superannuation funds grew almost 12% for the year ended June 30, while retail funds – which include those run by banks, insurers and master trusts – saw outflows of 30%. Most of the net cash inflows went to fund giants AustralianSuper, Hostplus and Sunsuper, according to figures provided by industry researcher Dexx&R.
AustralianSuper's cash inflows grew by 8.5% over the 12 months to June 30 – the latest date for which figures are available. After adding investment returns to the inflows, AustralianSuper's funds under management grew to just under A$160 billion ($110.05 billion) – up A$20 billion in just 12 months.
Source: Sydney Morning Herald
CHINA
The China Banking and Insurance Regulatory Commission (CBIRC) has further relaxed the rules for foreign insurers entering the China market, allowing foreign insurance groups to set up their own insurance companies and overseas financial institutions to hold stakes in the mainland operations of overseas insurance firms, among other liberalisations.
Foreign banks and insurers entering the China market can serve as role models for domestic players as most of them have strong capital, good reputation and advanced management experiences, the regulator said last week.
Source: CBIRC
JAPAN
The Government Pension Investment Fund’s investments in foreign assets has led to downward pressure on the currency and helped cause the yen to depreciate, according to a Goldman Sachs economist.
The GPIF’s hefty investments abroad kept the lid on gains in the yen without Japan having to resort to market interventions that could have prompted US president Donald Trump to accuse the country of manipulating its currency.
A strategist at Toronto-based TD Securities said that a wobble in US equity markets could trigger an appreciation in the yen, as it would prompt Japanese investors to sell US assets and repatriate their money. This could, in turn, force Japanese policymakers to intervene to weaken the currency
Source: Financial Times
Fukoku Mutual Life Insurance plans to triple its investment in domestic stocks this fiscal year as global monetary easing has crushed overseas bond yields, reducing the appeal of foreign debt.
Fukoku, which had ¥6.28 trillion ($57.74 billion) in total assets as of March, plans to halve its investments in foreign bonds this fiscal year. The company bets it can generate better returns on domestic stocks with attractive dividends, said Yusuke Onodera, general manager of investment planning at Fukoku.
Source: Reuters
Taiju Life Insurance plans to reduce its holdings of currency-hedged foreign bonds in the six months to March while increasing those of domestic bonds, the company’s investment planning official said on Thursday (October 17).
The insurer is likely to increase its holdings of foreign bonds without currency hedging, which it buys to have matching assets for its foreign currency products, by about ¥110 billion ($1 billion) during the period, said Yoshiki Nakamura, head of investment planning at the firm.
Source: Reuters
KOREA
National Pension Service’s (NPS) investments in so-called sin stocks like cigarette and alcohol makers have sparked a backlash over the ethics of Korea’s largest institutional investor, which is presided over by the Ministry of Health and Welfare.
Representative Kim Sang-hee of the ruling Democratic Party revealed last week that NPS invested a total of W1.15 trillion ($974.8 million) into 14 multinational tobacco companies, marking over 1% of NPS’s entire overseas security holdings. Of the investment, the highest amount, or W270.7 billion, went toward Philip Morris International, followed by British American Tobacco at W262.9 billion.
The practice stands in contrast with the global transition toward more responsible investing and pension operator moves to dump shares of companies whose businesses are seen as affecting health and the environment.
Source: Korea JoongAng Daily
Kyobo Life Insurance chairman Shin Chang-jae was recognised October 18 for the efforts he has made toward achieving sustainable management. Shin received the "Best CEO of the Year" award at the 2019 Korean Sustainability Conference held at the Lotte Hotel in central Seoul.
The insurance firm has topped the Korea Sustainability Index (KSI) in its division for 10 consecutive years. In 2010, Kyobo became the first local insurer to join the United Nations Global Compact, an initiative based on CEO commitments to implement universal sustainability principles and to take steps to support UN goals. In 2011, Kyobo became the first life insurer to issue a sustainable management report, which it now publishes annually.
Source: Korea Times
MALAYSIA
Tabung Haji, Malaysia’s pilgrims fund, has divested MYR1.2 billion ($287 million) worth of assets for a profit of MYR61.1 million at the end of June this year.
The fund, which has assets of MYR74 billion in assets, expects to double its full year profits this year. Its divestments included equities, financial instruments and real estate, which helped the fund post a revenue of MYR1.32 billion and a net profit of MYR815 million for the first half of 2019.
Source: The Malaysian Reserve
NEW ZEALAND
The NZ$43 billion ($27 billion) New Zealand Super Fund is undergoing its five-yearly review of its reference portfolio, an innovative and unique asset allocation reference point that allows the fund to benchmark the performance of its actual portfolio and any value added through active management.
Chief executive Matt Whineray said the process should be completed by June next year and that there were two to three more meetings with the board, and risk testing required, before any decisions were made on changes to the reference portfolio.
New Zealand Super has returned 14% per year over the past 10 years, and in the year to June 2019 returned 7.02%. But Whineray noted that future returns could well fall short of even its 8.7% long term goal. "We are not in that environment now ... we are maybe expecting about 5% to 6% on the reference portfolio,” he said.
Source: Top 1000 Funds
SINGAPORE
Singapore sovereign wealth fund GIC announced on Friday (October 18) the acquisition of a 40-storey office building in Paris.
The building, PB6, sits in the French capital’s La Defense district, and is in close proximity to an office tower it acquired about a year ago. GIC will pay €530 million ($592.25 million) for the 20-year-old property. “This is in line with GIC’s strategy, as a long-term investor, to acquire and add value to quality assets in gateway cities,” the fund said in a statement.
Source: Mingtiandi
GIC will also partner private equity firm KKR to invest $685 million in the biggest hospital group in the Philippines to tap the growing demand for private healthcare in Southeast Asia.
The sovereign wealth fund intends to invest $100 million for a 6.25% stake in the Philippines-based Metro Pacific Investments Corp’s hospital business, while the remainder will be allocated to mandatory exchangeable bonds.
Source: Reuters
Temasek is mulling to set up a new unit for renewable power projects as it seeks to invest beyond fossil fuels.
Nagi Hamiyeh, the investment group joint head of Temasek International, said the rising volatility of commodity prices and the society’s shift towards sustainability have made coal and oil deals less attractive, although the fund remains open to such investments.
“Now that most of these renewables have reached grid parity, we believe that these make much more sense for us to invest in, more than fossil fuels,” Hamiyeh said.
Source: Bloomberg
INTERNATIONAL
Allianz Real Estate has agreed to buy 62% of Ronsin Technology Center, a grade A office complex in Beijing, at a valuation of about €1 billion ($1.15 billion).
To do the deal, the property investment arm of German insurer Allianz formed a joint venture with Alpha Asia Macro Trends Fund III, a fund managed by Alpha Investment Partners, which is the private fund management arm of Singapore’s Keppel Capital.
The remaining 15% interest will be retained by the seller, D&J China. The asset will be jointly managed by Allianz Real Estate, Alpha Investment Partners and D&J China. The transaction is expected to close in the fourth quarter of 2019.
Source: Allianz
A new survey of the global pension systems of 37 nations by investment consultant Mercer ranked Australia’s at number three, Singapore’s seventh and New Zealand’s eighth. The rankings were based upon 40 metrics designed to assess whether a system offers improved financial outcomes for retirees, is sustainable and has the trust and confidence of the community.
Notably, Japan ranked 31st, and was criticised for a system with “major weaknesses and/or ommissions that need to be addressed”, including a need to raise the state pension age as the countrys’ life expectancy keeps rising.
Almost one-fifth of the world's population is forecast to be of retirement age by 2070, up from 9% this year, according to United Nations data.
Source: Mercer; Australian Financial Review
Asked to pick the most compelling trends driving economies and the consequent investment landscape over the next 30 years, institutional investors cited an ageing population as the most significant, found a survey by Investcorp.
Nearly eight in 10 (78%) chose the demographic shift. Artificial intelligence and machine learning ranked second (69%), followed closely by the impact of climate change (66%).
Participants were more likely to invest in this trend through private markets (62%) than public markets (26%). There was a similar clear preference when it came to investing in the other key trends.
Source: Investcorp
The United Nations Joint Staff Pension Fund’s Office of Investment Management said it will sell its holdings in listed coal companies by the end of next year and will not make any new investments in coal across all asset classes.
The $68 billion fund said that coal as a source of energy is becoming less economically viable, and poses a financial risk to its portfolio as renewable energy costs are forecast to undercut commissioned coal “almost everywhere” by 2030.
The move reflects a rising trend among asset owners to shift away from coal and other fossil fuels, from big sovereign wealth funds such as Norway’s to pension schemes to insurance firms like Axis Capital and Chubb.
Source: Chief Investment Officer; MarketWatch