A legal action against an Australian retirement fund – alleging it breached its fiduciary duties to one of its members by failing to adequately consider climate change risks – has global ramifications for asset owners worldwide.
Mark McVeigh filed the action against the trustee of the Retail Employees Superannuation Trust, a A$53.4 billion ($38.1 billion) fund, in September last year. He cannot access his superannuation until 2055, but said climate risks are biting now and his investment horizon is stretched.
McVeigh seeks declarations from the court to establish the trustee breached its duty, and also seeks injunctions to prevent future misconduct. A judgment will make law on how a major asset owner should address climate change risks when managing other people’s money.
Source: Investment Magazine
Superannuation funds had a tough 2018, with the median balanced fund a risk of posting a zero percent investment returns for the year, according to research house SuperRatings. This marked the lowest year of return since 2011.
The poor returns were in part a reflection of a poorly performing domestic stock market; the Australian Securities Exchange (ASX) closed 2018 at 5646 points, a drop of 6.9% since the beginning of the year and its worst performance in seven years.
Source: Australian Financial Review
Three of the Future Fund's top private equity professionals have exited the sovereign wealth fund to start their own firm. Veterans Steve Byrom, head of private equity; David Simons, director; and Jasmina Osmanovic, investment director, recently left Future Fund and will launch their private equity business in the near future.
Byrom had been with the fund since 2007. Simons and Osmanovic had worked there since 2008 and 2013, respectively. The Future Fund will begin to search for Byrom’s replacement next year. In the meantime, Stewart Tillyard, the fund’s head of unlisted property, will take the helm as acting head of private equity.
Source: Chief Investment Officer
The superannuation fund industry is largely avoiding investments into agriculture because fund managers lack expertise in the industry, foreign investment rules are complex and there's a lack of existing farm sector performance data, according to a federal parliamentary inquiry panel.
Just A$2.3 billion of Australia’s superannuation assets are invested in the farm sector by locally managed funds. The panel took six months to investigate how best to improve agricultural statistics, and as part of its results urged a shakeup in agricultural statistical information to better reflect the detail and timeliness required by investors.
The six-month-long inquiry’s findings recommended government implement a roadmap to improve agricultural statistics and encourage “co-operative maintenance of a flexible data environment”. The panel received multiple submissions and witnesses that bemoaned the “disparate and confused nature of data relevant to agriculture, its financial performance and investment suitability”.
Source: North Queensland Register
The Ministry of Finance has transferred 10% of its holding stake in People's Insurance Company of China (PICC) to the National Council of Social Security Fund (NCSSF), as part of Beijing's plan to use stakes of state-owned enterprises to replenish the pension fund.
After the transfer of the shares, the Ministry of Finance owns a 60.84% stake in PICC, while NCSSF has a 15.6% ownership in the insurer. The transferred stakes have a lock-up period, but it is not specified.
Source: PICC regulatory filing
Ping An Insurance established a co-chief executive officer decision-making mechanism and appointed Lee Yuansiong, Xie Yonglin, Tan Sin-yin as its three co-CEOs. They will be led by group chairman and CEO Ma Mingzhe, and will be in charge of retail customers’ integrated financial business, corporate customers’ integrated financial business and technology businesses, according to an announcement on December 14
Lee and Tan are currently group deputy CEOs at Ping An, while Xie is group vice president and deputy secretary of the party committee. The insurer said that adding the three roles in the decision-making structure will help to integrate internal resources more efficiently, enhance synergy, strengthen risk management and control. It did not say when the appointments will become effective.
Source: Ping An
Japan Post Holdings is looking to spend ¥300 billion ($2.6 billion) to gain a 7% to 8% stake in US insurer Aflac, with plans to make it an affiliate after four years.
The move is part of Japan Post’s bid to expand overseas as the domestic market in Japan shrinks. The firm supposedly hopes to get the deal approved by the end of December and complete the share purchase by the end of 2019. The former state postal service will carry out the purchase through a trust bank and make Aflac an equity affiliate, whereby its earnings will be accounted for on Japan Post Holdings' books in proportion to the percentage stake.
Aflac Life Insurance Japan sells cancer insurance. Its Japanese operation is the US insurer’s largest market, accounting for about 80% of its revenue.
Source: Nikkei Asian Review
Government Pension Investment Fund (GPIF) announced on December 26 it had appointed two domestic fund managers for passive equity mandates. FIL Investments and Resona Bank were appointed to manage passive equity mandates benchmarked to the Topix (including dividend) index.
Separately, the pension fund announced that it supported recommendations of the Task Force on Climate-related Financial Disclosure (TCFD), established by Financial Stability Board (FSB). The fund said it believed it was vitally important to minimise "negative externalities of its portfolio companies by integrating ESG factors into the investment process".
National Pension Service (NPS) will increasingly add risk assets, such as stocks and real estate, from 50% to over 60% of AUM, as it seeks to increase its returns, according to draft plans released by the Ministry of Health and Welfare on December 14.
The pension fund intends to increase the ratio of overseas investment from 30% to about 45% as well. The welfare ministry intends to improve investment returns by age groups and will send the draft plans to parliament at the end of December.
Separately, NPS lost W16.6 trillion of assets in October, as its investment returns fell into negative territory, according to a report by the pension fund's internal committee on December 28. It lost W15 trillion in domestic stocks alone, reporting a minus 16.57% return during the month. Its total assets fell to W637.04 trillion ($570.82 billion) from W653.63 trillion in September.
The Ministry of Health and Welfare announced four proposals to maintain a balance between reinforcing recipients’ benefits and securing the fund’s stability, according to the Korea Herald. The first proposal aims to maintain the current system with an income replacement rate set at 40% and insurance premiums at 9%. The basic pension for the elderly would be increased to W300,000 ($265) per month in 2021.
The second proposal would only increase the basic pension to W400,000 in 2022, leaving the income replacement rate and insurance premiums the same as the first. The third option would raise insurance premiums to 12%, with an income replacement rate set at 45%, while the fourth plan would raise the premiums to 13% and set income replacement rate at 50%. The W300,000 basic pension would remain the same as in the current system.
Source: Korea Herald, Chief Investment Officer
Hyundai Marine & Fire Insurance Co Ltd (HMFI), South Korea’s second-largest non-life insurer, signed a stock purchase agreement to buy a 25% stake in Vietnamese non-life insurer VietinBank Insurance Joint Stock Corp (VBI) on December 21.
The deal is equivalent to 16.6 million shares of VBI, a subsidiary of Vietnam’s leading commercial lender VietinBank. After the sale, VBI will raise its capital to VND666.7 billion (US$28.5 million).
Source: Vietnam News
Hong Kong local insurer FTLife Insurance will be acquired by property developer New World Development's (NWD) non-wholly-owned unit.
NWD has agreed to pay HK$21.5 billion in cash for the entire issued share capital of FTLife Insurance from a subsidiary of Chinese private equity investment group Jiuding. The insurer has maintained a solvency level of 515% as of year-end 2017, which is significantly above the minimum regulatory requirements.
Source: NWD's regulatory filing
Malaysia’s largest asset management firm Permodalan Nasional Berhad (PNB) and state pension fund Employees Provident Fund (EPF) agreed to jointly acquire the commercial assets at London’s Battersea Power Station for £1.58 billion ($2 billion), both funds said on December 17.
The assets were acquired from a consortium made of Malaysian property developers SP Setia and Sime Darby Property and EPF. Both funds own substantial holdings in the property developers. The acquisition is targeted to be completed in the first quarter of 2019, the funds said in a joint statement.
Malaysia's government filed charges against Goldman Sachs and two of its former employees for corruption and money laundering, alleging they helped ensure the theft of billions of dollars from sovereign wealth fund 1MDB.
Goldman subsidiaries and ex-bankers Tim Leissner and Ng Chong Hwa were accused of misappropriating $2.7 billion, bribing officials and giving false statements when helping to arrange bonds for the state fund. The money was allegedly stolen by former prime minister Najib Razak and associates. Goldman underwrote bonds totalling $6.5 billion on three occasions for 1MDB, and earned $600 million for doing for so - an amount well in excess of traditional arranger fees.
Malaysian attorney general Tommy Thomas said December 17 that Goldman and its former employees were accused of making false and misleading statements to misappropriate $2.7 billion from the bond issuances, which took place in 2012 and 2013.
Source: The Guardian
HSBC received the regulatory nod to sell its stake in a Malaysian insurance joint-venture business to Hong Kong-headquartered insurer FWD. the Malaysian central bank approved the sale in HSBC Amanah Takaful Malaysia for an undisclosed sum, and it is expected to be concluded in the first half of 2019.
Source: Straits Times
The New Zealand Superannuation Fund awarded a NZ$298 million ($215 million) risk-arbitrage mandate to a diversified international investment manager. Neuberger Berman won the customised mandate and its principal strategies group will oversee the investments.
The mandate's objective is to generate uncorrelated absolute returns arising from mispricing opportunities related to corporate activity, such as mergers and acquisitions, corporate restructurings and public offerings.
Separately, the sovereign wealth fund saw investment returns collapse during a tumultuous 2018, with the fund December Investment Environment Report noting that it only made 3.5% returns over the previous 12 months, well down on the double-digit returns it had enjoyed for years previously.
A bill that advocates lowering the working age of government workers from 60 to 56 gained overwhelming support from the Philippines' House of Representatives.
The lawmakers voted overwhelmingly on the third and final reading of the measure that seeks to amend Section 13-A of the Republic Act 8291, also known as the “Government Service Insurance Act of 1997”. According to the Alliance of Concerned Teachers party-list Representative Antonio Tinio, who was the principal author of the bill, the proposed law will allow civil servants to fully enjoy their retirement benefits. They had been clamouring for the government to lower the retirement age for years.
Source: hrm Asia
Taiwan insurers are allowed to do repurchase and reverse repurchase trades on their overseas bond investments, instead of only Formosa bonds, said Wellington Koo, chairman of the Financial Supervisory Commission.
As a result in the relaxation of the rules, insurers can have more flexibility in meeting their short-term funding needs, and do not have to sell the equities and bonds to ease funding pressure. The trade amount cannot be more than 2% of an insurer's overseas investment.
Source: United Daily News
INTERNATIONAL (EXCLUDING ASIA)
The New York State Common Retirement Fund committed at least $725 million to Asia-focused strategies in October, according to a recently released report from third-largest US public pension plan.
The $207.4 billion fund earmarked $500 million to strategies run by Asia Alternatives Management: $200 million to New York Balanced Pool Asia Investors III; and $300 million to New York Co-Investment Pool Asia III.
New York Common also made a $225 million commitment to ARA Real Estate Partners Asia II, a closed-end, diversified pan-Asia commingled real estate fund managed by ARA Asset Management.
Source: Chief Investment Officer
Canada Pension Plan Investment Board (CPPIB) has become the cornerstone and biggest investor in the newly launched GLP Japan Development Partners III, the largest ever Japan-focused logistics private real estate fund.
GLP JDP III is expected to reach Y625 billion ($5.6 billion) and is run by Singapore-based GLP, a property fund house with $60 billion under management. CPPIB also partnered GLP on its first two Japan development vehicles, GLP Japan Development Venture I and II.