Insto roundup: QSuper and Sunsuper eye merger; China Life Pension doubles assets

AUSTRALIA

QSuper and Sunsuper are in talks about merging to create Australia’s largest superannuation fund with $180 billion in assets amid an industry trend towards consolidation.

QSuper has around $113 billion under management and Sunsuper about $70 billion. It is understood the two Queensland funds have been in discussion since July.

Separately, First State Super will merge with VicSuper to create Australia’s third largest player, with $120 billion. And the $45 billion Hostplus and Club Super have finalised their merger, and Tasplan is planning a tie-up with MTAA Super to create a $22 billion fund.

Source:  Investment Magazine

As the consolidation of Australia’s superannuation industry accelerates and assets under management balloon, an increasing number of funds may look to bring their investments in-house.

Willis Towers Watson’s Jessica Melville said internalisation was particularly topical as assets get bigger and regulatory scrutiny focuses on super funds being best of breed. “Scale is an obvious one that speaks to internalisation,” said Melville, who heads up the strategic advisory and investments division at Willis Towers Watson. “At a certain size, it’s almost a no brainer to consider internalisation of some sort.”

AustralianSuper has been gradually increasing its inhouse assets to 40% of its portfolio as the country’s largest pension fund seeks to lower costs and access better deals. And First State Super, which is in the midst of merging with VicSuper to become a $120 billion fund, is looking at a similar hybrid model. 

Source: Investment Magazine

CHINA

China Life Pension has doubled its assets under management in the past 12 months to more than Rmb1 trillion ($142 billion) and is expected to join the ranks of the world’s largest pension funds, such as the Canadian Pension Plan Investment Board, over the next two years.

The fund has invested primarily in China’s domestic fixed-income market and has not yet been permitted to invest overseas. The rapid growth for the Beijing-based company has come after the Chinese government permitted it to manage the pension holdings of provinces around the country.

Source: Financial Times

US senator Marco Rubio plans to introduce legislation to block the Federal Retirement Thrift Investment Board (FRTIB) from investing in Chinese stocks after the federal pension fund delayed a decision on tracking an index provided by MSCI that includes Chinese firms.

The effort by Rubio comes amid heightened US-China trade tensions and as the American government considers ways to limit the flow of capital to Chinese companies due to security concerns about their activities.

Source: Reuters

JAPAN

Government Pension Investment Fund (GPIF) returned 1.1%, or ¥1.8 trillion ($17 billion), in the quarter ended September 30, with assets totalling ¥161.8 trillion. Domestic stocks were the fund’s best performing investment, gaining 3.3%, while foreign equities added 0.1%. The return was 1.2% for overseas bonds and 0.3% for Japanese debt.

The GPIF’s results were the first since the fund announced last month that it would give itself leeway to buy more of bonds from outside its home market by considering currency-hedged foreign bonds as part of its domestic debt portfolio. The move gives the fund more options as domestic yields remain low, GPIF President Norihiro Takahashi said in an interview in Tokyo on October 9.

While the GPIF has previously disclosed the amount of investment and the holding ratio of each asset, it decided not to do so, for the first time, until its new portfolio is decided, according to the minutes of its August management committee meeting, published on November 1. The new portfolio is expected to be finalised early next year before the new fiscal year begins in April.

Sources: GPIF, Reuters, Bloomberg

Japan Post Insurance plans to increase exposure to risk assets in the current financial half year to March, the company said on October 29, ditching a cautious investment stance it had kept for a couple of years.

The insurer, a part of former state-run postal system Japan Post Group, thinks the global economy will avoid a recession even though uncertainties remain on US-China trade war and Brexit. In the current financial half year, Japan Post Insurance, which holds ¥73.4 trillion ($673.5 billion) of assets, plans to increase Japanese stocks as well as foreign bonds without a currency hedge.

Source: Reuters

Nippon Life plans to increase its holdings of foreign bonds without currency hedge in the six months through March 2020, senior company officials said on October 29.

Nippon Life, one of Japan’s biggest insurers, said the firm expects the dollar to move between ¥95 and ¥115 through March, and may buy US bonds without currency hedge if the dollar falls near ¥100.

Source: Reuters

KOREA

National Pension Service (NPS) had built up shares in major corporate names, owning more than 10% in nearly 100 as of late October in spite of poor performance of the Korean listed companies.

NPS held 5% or more stake in a total of 313 publicly traded Korean companies as of last October 25, based on data compiled by local industry tracker CEO Score.

The total count increased by nine compared to the end of September last year but the worth of the shares it owned fell by W859.5 billion ($740.8 million) to W113.8 trillion over the same period. The pension fund held over 10% stake in 98 companies, seven additions against the same period last year.

Source: Maeil Business News Korea

Korean pension funds are showing signs of renewing shopping spree by cherry-picking bargains or stocks paying relatively good dividends to possibly bring about a year-end rally at the Korean bourses.

According to Korea Exchange on November 3, pension funds were net buyers of Kospi stocks worth W534.5 billion ($460.6 million) last month, which are about one fifth the size of their net buying in August and September.

Local pension funds had played a role to defend the stock market from massive selling by foreign investors since August 2. Thanks to their offensive position, the benchmark index rebounded from 1,967.79 at the end of August to 2,063.05 in September.

Source: Maeil Business News Korea

MALAYSIA

The chief executive of Employees Provident Fund, Tunku Alizakri Alias, said the pension fund is independent in making investment decisions and that the government has no influence on how it does business, he said at an event on October 30.

The fact that EPF is grouped as a state-linked investment company has raised the idea that the government might influence the pension fund in terms of investment decisions. 

Source: Malay Mail

Khazanah Nasional’s divestment exercise over the past year only involved commercial assets, not strategic ones, said Azmin Ali, Malaysia’s economic affairs minister, adding that the liquidated assets had achieved its commercial target to generate revenues.

“Firstly, it was to pay Khazanah’s debts, not government debts and secondly, to be reinvested in new investments for Khazanah’s strategic assets,” he said. As of September 30, Khazanah’s strategic stakes in Malaysia Airports Holdings and Telekom Malaysia was 33.21% and 26.15% respectively.

He added that Khazanah is expected to produce profits of around Rm5 billion ($1.2 billion) for the financial year of 2019, which stands in contrast to losses of Rm6.3 billion the fund posted in 2018.

Source: Malay Mail

Malaysia has rejected an offer from Goldman Sachs of “less than $2 billion” in compensation over the 1MDB scandal, with the country seeking $7.5 billion, Prime Minister Mahathir Mohamad told the Financial Times.

The Southeast Asian country has charged Goldman and 17 current and former directors of its units for allegedly misleading investors over bond sales totalling $6.5 billion that the US bank helped raise for staet fund 1Malaysia Development Berhad.

US authorities say about $4.5 billion was siphoned from 1MDB, founded in 2009 by then-Malaysian prime minister Najib Razak. The scandal helped Mahathir hand a surprise defeat to Najib in a general election last year.

Source: Financial Times

Meanwhile, the US has struck a deal with fugitive financier Jho Low to recover about $700 million (£541.6 million) in assets tied to the corruption scandal around 1MDB. This brings the total amount recovered by US authorities in the case to more than $1 billion.

Low is a central figure in the global scandal that saw billions of dollars go missing from 1Malaysia Development Berhad. He allegedly misappropriated the assets, but denies wrongdoing. He continues to face separate charges in the US involving money laundering and bribery.

Source: BBC

NEW ZEALAND

The NZ Superannuation Fund is considering ending its policy of hedging almost all of its foreign investments in New Zealand dollars, which could expose a meaningful portion of the NZ$43 billion fund to foreign currency movements and mean more volatility in its asset valuation.

At the end of June, only 15% of the fund's assets were invested in New Zealand, with 47% committed in North America and 17% in Europe. The fund hedges those foreign investments to shield them against shorter-term changes in the value of the New Zealand dollar against other currencies. But the fund is considering altering its approach so the value of at least some of passive foreign investments rise if the New Zealand dollar fell, and fall if the Kiwi gained ground.

NZ Super chief executive Matt Whineray said the fund would look at its hedging policy over the next "couple of months".

Source: Stuff.co.nz

THAILAND

Thailand’s $30 billion Government Pension Fund is reducing exposure to riskier assets in a revised asset allocation for the medium to long term, head of investment strategy Arsa Indaravijaya said in an interview.

The plan involves boosting exposure to defensive Thai stocks, including those offering higher dividends, as a cushion against any downturn or market volatility.

“The new allocation points to a de-risking mode,” Arsa said. “Risky assets have been shaved off, reflecting a late cycle that we’re moving toward, and we’re allocating some more into private assets like infrastructure and high-grade credits.”

Source: Deal Street Asia

Thailand’s government pension fund (GPF) will complete its ESG sourcing tools by the end of the year to screen investment opportunities in Thai equities and fixed income assets, said Vitai Ratanakorn, secretary-general of GPF.

“By the first quarter of 2020, GPF targets to use an ESG lens for all of our investments in the Thai market across equity classes including real estate, private equity and infrastructure,” added Ratanakorn. “This means GPF will not invest in a company if we have material concerns on its ESG track record.”

GPF’s Seree Nonthasoot

According to Seree Nonthasoot, board member of GPF and governor of the Stock Exchange of Thailand, the pension fund’s Bt1 billion ($33.1 million) ESG-focused portfolio posted a ten-month return of 4.6%, surpassing the GPF main equity fund by 50 basis points.

Source: Bloomberg

INTERNATIONAL (EX-ASIA)

Caisse de dépôt et placement du Québec (CDPQ) plans to set up an infrastructure investment trust (Invit) to house Indian road assets acquired by the Canadian pension fund manager, two people aware of the development said.

On 16 October, The Economic Times reported that CDPQ had agreed to acquire Highway Concessions One, a roads portfolio owned by infrastructure fund manager Global Infrastructure Partners, for around Rp24 billion ($339.4 million).

An Invit is a pool of money collected from investors to manage operational infrastructure projects, in return for a regular yield to its unit holders. At least 10% of CDPQ’s proposed Invit will be sold to domestic institutions.

Source: Livemint

The chief executive of Norway’s state oil fund has stepped down, but will remain in place until a replacement is found and after that will remain with institution.

Yngve Slyngstad has been in charge for 12 years at Norges Bank Investment Management, believed to be the world’s biggest sovereign wealth fund, with 9,742 billion kroner ($1.07 trillion)

NBIM will now start searching for a replacement, after which Slyngstad will contribute to the further development of its investment strategy. His responsibilities will include building up unlisted renewable energy infrastructure as a new investment area.

Source: Norges Bank