Insto roundup: Temasek, CapitaLand in $8bn deal; QFII limit doubled
The Productivity Commission published its report on the superannuation industry on January 10, which noted that structural flaws — unintended multiple accounts and entrenched underperformers — are harming millions of members. The commission argued that fixing these problems could save members A$3.8 billion ($ billion) a year, and mean a new job entrant could have A$533,000 when retiring in 2064.
The report noted a number of issues in the industry, including underperforming products, particularly retail funds, and excessive fees, cost savings from increased scale not being fully passed to members via lower fees or better returns, too few mergers, and one-third of accounts being unintended multiple accounts. It added that there was insufficient competition between super funds in the choice segment.
It made 31 reform recommendations, including introducing clearer regulations, better trustees, and clearer selection options from a 'best in show' set of funds, as well as eliminating trailer fees to financial advisers immediately.
Source: Productivity Commission, Australian Financial Review
One idea offered by Peter Costello, chairman of the Future Fund, Australia's sovereign wealth fund, is that it be allowed to begin offering low-fee superannuation products. The idea gained interest from Liberal Party MP Tim Wilson, who chairs the economics committee in the House of Representatives.
But the idea was panned by the Labor opposition party, as well as other super fund providers, which said they delivered better returns than those achieved by the Future Fund. The median industry growth fund delivered annual returns of 12.73% over one year (versus the Future Fund's 10.7%), 11.92% over three years (versus 8.1%), 10.72% over five years (versus 10.2%), 12.25% over seven years (versus 10.7%) and 8.82% over 10 years (versus 9.2%), to September 30 2018.
Source: Australian Financial Review
Beijing has doubled the quota under the qualified foreign institutional investor (QFII) programme to $300 billion, the State Administration of Foreign Exchange said in a statement on Monday (January 14).
It’s the first expansion since July 2013, when the ceiling was raised to $150 billion from $80 billion. About $101 billion of the quota is in use by overseas institutions, according to data compiled by Bloomberg.
The QFII scheme allows quota-holders to invest directly into Chinese securities onshore and is one of the main channels for cross-border investment into the Chinese economy.
The Ministry of Finance (MoF) has transferred 10% of its holding stake in China Taiping Insurance to the National Council of Social Security (NCSSF), as part of Beijing’s plan to use stakes of state-owned enterprises to replenish the state pension fund.
The precise holdings of Mof and NCSSF after the transferred were not specified in the announcement made by the insurer. China Taiping is the second insurer whose stakes are transferred to the pension fund, after People’s Insurance Company of China (PICC).
Source: China Taiping filing
The government's plan to sell a 10% stake New India Assurance and General Insurance Corporation of India (GIC Re) is likely to be completed by the end of the fourth quarter of the financial year ending March 2019.
Sources told Moneycontrol that the government could garner Rs100 billion ($1.4 billion) from the stake sales in both entities.
"The stake sale process is underway. Through the offer-for-sale route, the government is looking to complete the process by the end of financial year 2019," said an official, who was not named in the report.
The National Pension Service has established a division to fulfil its stewardship responsibilities, following its adoption of the country's principles in July 2018. Its decision to do so was seen as an important step to improve the corporate governance of 300-odd South Korean companies.
The $567 billion pension scheme promoted its nine-member team of responsible investment to the global responsibility investment and governance division in late December, an NPS spokesman said on January 8. To engage actively with invested companies, it will increase the number of employees at the division headed by executive Sung-Jae Choi to about 30.
Source: Korean Investors
BNY Mellon and State Street are both opening offices in Jeonju, the southern Korean city where the NPS is headquartered. Charles W. Scharf, chief executive of BNY Mellon and David Cruikshank, BNY Mellon`s Asia Pacific chairman, will visit NPS in Jeonju on January 24 to sign an agreement to open the bank’s new office in the regional city, according to the pension fund on January 9. The custodian bank plans to open the Jeonju office in March.
State Street set up a temporary office in the city on January 8 and is reportedly preparing to open a full office in March, according to sources.
Malaysia’s takaful or Islamic insurance market is expected to receive a boost as the government of the Muslim-majority nation seeks to improve access to insurance and increase market penetration, according to a report by Fitch Ratings.
Growth in the Islamic insurance sector outpaced that of conventional insurance during the first half of 2018, Fitch noted. Family (life) takaful grew by 12.9% in that period, while general takaful grew by 7.1%. By comparison, the conventional insurance sectors grew 5.4% for life and 0.9% for general over the same period.
However, the coming implementation of new accounting rules will pose a challenge to Islamic insurance operators, similar to their effect on the broader insurance industry.
CapitaLand is acquiring Temasek subsidiary Ascendas-Singbridge (ASB) in a deal valued at S$11 billion ($8 billion), including debt, to create Asia's largest diversified real estate group.
After the transaction, CapitaLand's combined total assets under management (AUM) will exceed $116 billion across more than 30 countries, and cover asset classes such as logistics/business parks, industrial, lodging, commercial, retail and residential.
In addition, CapitaLand will surpass its 2020 assets under management target of $100 billion, putting it among the top 10 real estate investment managers in the world.
Source: Straits Times
United Overseas Bank has signed an extension of its regional bancassurance distribution arrangement with UK-based insurer Prudential for 15 years, at a cost of S$1.15 billion ($850.91 million). Under the agreement, UOB will distribute Prudential's insurance products through its branches in Singapore, Indonesia, Malaysia, Thailand and Vietnam to consumer bank clients.
Temasek and Sequoia India have invested $6 million in Singapore startup BasisAI.
It’s the second-largest seed round funding by a Singapore startup and the report noted that the investment is noteworthy as both Temasek and Sequoia are known to typically back more established or mature-stage companies.
Co-founder and CEO of BasisAI is 37-year-old Feng-Yuan, was formerly director of data science and artificial intelligence at GovTech, an agency under the Prime Minister’s Office that builds digital government services and is leading the charge to turn the city state into a ‘smart nation’.
Source: Vulcan Post
Taiwan insurers may soon have lower risk-based capital charges for 100 ‘debt-like’ stocks. The Taiwan Insurance Institute, commissioned by the Taiwan Stock Exchange, has identified 100 such stocks with high dividends and low volatility.
It is believed the Financial Supervisory Commission may move to reduce their risk charges to encourage insurers to invest in domestic stocks, according to a media report.
The Financial Supervisory Commission did not respond to AsianInvestor queries to comment on the potential regulatory development.
Source: China Times
INTERNATIONAL (EXCLUDING ASIA)
Most North American insurance firms expect to fail to meet target returns and in response are continuing to build their alternative asset exposure; however they are struggling to achieve their target allocations to private markets. These were among the findings of an Aberdeen Standard Investments survey of insurers overseeing $3.6 trillion in assets under management.
In addition, the bulk of insurers feel the ongoing shift from public to private markets will drive an increase in outsourcing to external managers with specialist capabilities. The asset classes most favoured for further investment are corporate loans, real estate loans and private equity.
Meanwhile, 86% of respondents agree that the insurance industry is on the verge of a seismic tech-driven shift, yet the vast majority of them do not expect to have to adapt their investment approaches as a result.
Source: Aberdeen Standard Investments
The board of the $24 billion system approved the Lightspeed investment on November 16 and the commitment to CMC Fund III, focused on entertainment and media-related assets, on December 12, according to chief investment officer William Coaker Jr’s January 9 investment report.
Source: Chief Investment Officer