Insto roundup: Pension funds suspend India deals; BLF delays ESG mandate
GLOBAL
Insurers are well capitalised to absorb the hit from rising claims and costs related to the Covid-19 pandemic, rating agency AM Best said, citing a stress test it had conducted.
Most insurance companies in Asia Pacific generally performed well in the test, as did those in Europe, the Middle East, Africa and Latin America, the test showed. Property and casualty insurers in the US and Canada performed relatively well in the stress test, compared with life, annuity and health insurers.
“Insurers are likely to see a significant hit to earnings in 2020, rather than a material decline in risk-adjusted capitalisation," said Mahesh Mistry, senior director at AM Best Rating Services.
Source: Reuters
AUSTRALIA
Commonwealth Bank of Australia (CBA) has agreed sell a 55% interest in Colonial First State (CFS) to New-York based alternative investment firm KKR.
The transaction implies a total valuation for CFS at A$3.3 billion ($2.12 billion). CBA will be receiving cash proceeds of A$1.7 billion from KKR, according to a press release from CBA.
CBA and KKR intend to undertake a significant investment programme aimed at strengthening the position of CFS as a retail superannuation and investments businesses.
Source: CBA press release
Australia's biggest superannuation fund suffered a downgrade after declining to reveal details of high staff turnover and the performance of internal investment teams.
Citing concerns about AustralianSuper's ability to outperform peers, investment research house Lonsec has downgraded the A$168 billion ($108.32 billion) fund's flagship investment option from "recommend" to "investment grade" in material sent to financial advisers.
The report said the lack of transparency raised questions about whether AustralianSuper could implement an ambitious plan to bring 50% of its investment management in-house by 2021.
Source: Australian Financial Review
Superannuation fund Hesta has partnered with a New York-based software company GoldenSource Nexus to support its strategic investment decisions and fund management.
The vendor is tasked with helping the A$56 billion ($36.1 billion) fund to overhaul its investment data management. It will help Hesta focus on managing investments in-house, deliver improved data-backed investment decisions and reporting and use a greater variety of data sources.
Source: Financial Standard
CHINA
China insurers’ solvency ratios are likely to drop in the first quarter of 2020 to reflect the sharp fall in stock prices in this period, according to rating agency Moody’s. Their solvency metrics will remain exposed to lower stock prices and interest rates as a result of disruptions caused by the coronavirus pandemic.
Major direct insurers and reinsurers reported average comprehensive solvency ratios of more than 200% in 2019, well above the regulatory minimum of 100%.
Source: Moody’s
INDIA
Private lender IndusInd Bank is in discussions with at least three strategic investors, including Japan's Nippon Life and France's Axa Group, as the bank plans to raise more than $500 million to shore up its balance sheet, said two people aware of the development.
The talks with these strategic investors follow the bank's earlier efforts to tap financial players such as private equity and pension funds and sovereign investors for fundraising.
Source: Live Mint
JAPAN
Japan Post Bank, the nation’s biggest holder of domestic savings, expects its net income will fall about 27% to ¥200 billion ($1.9 billion) in the year ending March 2021.
The dismal estimate reflected sluggish sales of Kampo insurance products at subsidiary Japan Post Insurance due to an improper sales scandal, as well as deterioration in the investment environment for group funds from the savings and insurance businesses amid the Covid-19 crisis.
Japan Post Bank has been increasing investments abroad to make up for rock-bottom interest rates at home, but this made it more vulnerable to market volatility. Despite the company reporting ¥121.9 billion in unrealised losses on overseas collateralised loan obligations last quarter, senior managing executive officer Hiroichi Shishimi said it would keep adding to its CLO holdings.
Source: Bloomberg, Nippon.com
KOREA
The Public Officials Benefit Association (Poba) is shifting away from a defensive stance to put its increased cash to work as asset price declines caused by coronavirus have helped ease valuation concerns, said chief investment officer Jang Dong-hun.
The $12 billion pension scheme for local government employees is targeting fixed-income, distressed and secondary investments in developed markets. Over the past two years, it has reduced equity holdings to 14% of total assets from 24% at the end of 2017, while increasing cashable investments to 10.1% or W1.4 trillion ($1.2 billion), versus 0.8% during the same period.
"Now it would be better to invest in infrastructure that generates availability-based revenues such as telecommunications facilities and data centres," said Jang. "Because these investments require expertise, we are looking for experienced management companies."
Source: Korean Investors
Korea's Financial Services Commission announced a three-year plan for 2020-2022 to enhance the country’s competitiveness and establish it as an international financial hub. The plan will be finalised later this month.
The aim of the plan involves regulatory reforms to promote innovation, enhance financial market infrastructure, and build global capacity with a focus on Asean markets. It will also seek to promote pension fund management services, facilitate innovation in the asset management sector and bolster outbound investment using public funds including the National Pension Service and Korea Investment Corporation.
Source: Regulation Asia; Financial Services Commission
MALAYSIA
Malaysian sovereign wealth fund Khazanah Nasional has ceased to be a major shareholder in cash company Malaysian Genomics Resources Centre (MGRC).
This came after MGRC’s largest shareholder – Syntamatix, an indirect unit of Khazanah – disposed of 12 million MGRC shares or 11.59% in the company on May 13.
Khazanah, through its subsidiaries Syntamatix, Neuramatix and Encipta, previously controlled 61.24% of MGRC as of October last year, according to MGRC’s latest annual report.
Source: The Edge Markets
SINGAPORE
Carlyle Group and Singapore sovereign wealth fund GIC are using fake excuses to renege on buying a 20% stake in American Express Global Business Travel, according to a lawsuit unsealed in the US.
A unit of Certares Management claims Carlyle’s losses from the coronavirus left it with a whopping case of buyer’s remorse and prompted its attempt to scrap the stock purchase, which had valued the travel entity at $5 billion when it was announced in 2019. Certares leads a group of investors in the deal, including Qatar Investment Authority and several Carlyle entities.
“The Carlyle Group’s losses do not provide defendants with a basis to withdraw from the transaction,” Juweel Investors, a subsidiary of New York-based Certares, said in the lawsuit. The investment fund “cobbled together a series of pretextual and transparently false excuses to justify their refusal to close” the deal, Juweel said.
Source: Bloomberg
TAIWAN
A high-profile request for proposal for an environmental, social and governance-focused fixed income allocation from the Bureau of Labor Funds has been pushed back to the second half of the year.
Money managers, who declined to be named, said the NT$4.2 trillion ($140.4 billion) state pension fund had originally been expected to issue the RFP in May or June. A BLF spokeswoman said in an email that its ESG fixed income plans were "still under discussion".
Source: P&I
INTERNATIONAL (EXCLUDING ASIA)
Several large foreign pension funds have suspended India investment plans until they come to grips with the damage Covid-19 does to global and local economies.
Australian Super, Caisse de Dépôt et Placement du Québec (CDPQ), Canada Pension Plan Investment Board (CPPIB) and Ontario Teachers’ Pension Plan, among others, had slated billions of dollars of investment into India, but have either put plans on hold or are reconsidering, two people with direct knowledge of the matter said.
Canadian pension funds were looking to invest in renewable energy and private debt, sources said. “All commitments to investments in illiquid assets – direct or through a fund – have been put on hold,” according to a private equity fund manager.
Source: Economic Times
CPPIB and CDPQ have halted logistics investment deals in India as Canada’s two biggest pension funds evaluate the impact of Covid-19 on businesses in Asia’s third-largest economy.
CPPIB has suspended its Rp14 billion ($185 million) acquisition of 35% stake in International Cargo Terminals and Rail Infrastructure, part of Mumbai-based logistics firm JM Baxi.
CDPQ has put on hold its planned purchase of a portfolio of seven toll roads from Global Infrastructure Partners, its first foray into roads in India, as the two parties could not reach an agreement to close the transaction within agreed timelines, said sources familiar with the matter.
Source: LiveMint
Norway plans to draw a record Nkr382 billion ($37 billion) from its sovereign wealth fund, forcing the world’s biggest state investor to embark on a historic asset sale to generate cash. It is likely to focus on its bond portfolio to generate the cash. Some experts expect other oil-based SWFs to be forced into similar moves.
Norway's unprecedented withdrawal is more than four times the previous record set in 2016. It exposes the scale of the economic damage done by the twin crises of Covid-19 and a collapse in global oil markets, with western Europe’s biggest crude exporter now facing its worst economic slump since World War II.
Separately Norway’s central bank, which manages the $1 trillion sovereign wealth fund, has decided to exclude 12 energy companies from the fund for environmental and human rights reasons.
Source: BNN Bloomberg; Chief Investment Officer; AsianInvestor