AUSTRALIA

The superannuation funds of Australia may soon be forced to hold billions of dollars in capital as they exceed the country's bank sector in terms of capital, according to consultancy Rice Warner. 

The firm said the capital requirements will become legislated as the industry, which is forecast to swell to $4.8 trillion by 2034, buys more so-called strategic assets particularly in financial services. Founder and executive director Michael Rice said trustees should ensure about 1% of their fund’s total assets is held in a separate account.

The superannuation industry is already required by the prudential regulator to hold 25 basis points of its earnings rate for operational risk. Rice said capital would also need to be held against certain investments as some super funds were already starting to lose money on some of the strategic assets. 

Source: Investment Magazine

CHINA

The National Social Security Fund (NSSF) has delivered an investment return of Rmb300 billion ($43.36 billion) of 2019, or a rate of 15.5%, Chen Wenhui, vice chairman of the National Council of Social Security Fund (NCSSF) said in a wealth management forum.

As of end 2019, NSSF had total assets of Rmb2.6 trillion, with an accumulated investment return of Rmb1.25 trillion. It has made an annualised 8.15% investment return rate since its set-up in 2000.

Chen also said that NCSSF signed agreements with 22 provinces or administrative unit to manage pension assets of Rmb1.09 trillion, of which Rmb908 billion has been transferred into NCSSF's account. Last year, China kicked started the grand scheme to transfer assets from state-owned enterprises (SOEs) to public pension plans. A total of 58 central SOEs have shifted some Rmb800 billion in state-owned assets to NSSF.

Source: financialnews.com.cn

INDONESIA

The United Arab Emirates will invest $22.8 billion in Indonesia through a sovereign wealth fund being set up by President Joko Widodo as the Southeast Asian nation seeks to finance billions of dollars of infrastructure and energy projects.

The UAE plans to invest in building Indonesia’s new capital in Borneo and develop properties in Aceh province, the cabinet secretariat said in a statement. Other big investors keen to contribute to the SWF include Japan’s SoftBank and the US International Development Finance Corp.

Widodo, also known as Jokowi, who is in his second and final term, has pledged to double down on an ambitious infrastructure building programme that will require more than $400 billion in the next five years to modernise the archipelago of more than 260 million people.

Source: Bloomberg

JAPAN

The Government Pension Investment Fund (GPIF) and TCorp, the financial services provider to the New South Wales public sector in Australia, purchased a stake in Brussels Airport from Ontario Teachers’ Pension Plan. The Canadian retirement fund remains the largest shareholder in the airport after close; before the sale, it had held a 39% stake in the airport.

GPIF has a mandate with the Stepstone Group. GPIF made the stake purchase through StepStone Infrastructure & Real Assets.

Belgian Federal Holding and Investment Company holds a 25% stake in Brussels Airport. Dutch pension fund manager APG Asset Management and Australia's QIC are also investors in the airport.

Source: Ontario Teachers’ Pension Plan

Nippon Life Insurance plans to bolster investment in health and artificial intelligence start-ups, as well as fledgling companies developing fintech, or financial services using information technology.

The major life insurer will increase its investment quota for such start-ups from the current ¥10 billion ($91.2 million) to ¥30 billion in April, aiming to use target firms’ technologies to improve its operational efficiency and develop new insurance products and related services.

Source: Jiji Press

KOREA

The National Pension Service (NPS) has abolished Korea-focused teams under the three investment divisions of private equity, real estate and infrastructure to place them in newly-created Asia teams, as part of its push to boost global investment.

Under the recent reorganisation, the three alternatives divisions now consist of three teams focused on Asia, Europe and the US respectively, instead of domestic and global teams, according to financial industry sources on January 8.

Source: Korean Investors

NPS reported that it trimmed its domestic holdings in construction, chemical, auto parts and media while upping its stakes in financial, material and equipment sectors in the latter half.

Korea’s largest institutional investor published a report on the 113 stocks in which its ownership saw changes in the fourth quarter, according to the Financial Supervisory Service on Wednesday (January 8).

The pension fund loaded up on most of the stocks by one percentage point or more. But its stake fell in 44 stocks, most of which were small companies outside the Kospi 200 based in the construction, chemical, media, and auto part and machinery sectors

Source: Maeil Business News Korea

NPS took part in Blackstone Infrastructure Partner’s (BIP) $2.2 billion buyout of the remaining stake in Tallgrass Energy, a US pipeline operator.

Singapore’s GIC, the Universities Superannuation Scheme (USS) of the UK and Spanish energy company Enagas also participated in the transaction, according to a Tallgrass announcement last month.

Source: Tallgrass Energy

South Korean President Moon Jae-in called for the swift revision of laws to allow institutional investors to ramp up shareholder engagement in the domestic market. This, he stressed, would prevent abuses of power in the business world.

In his New Year’s speech on January 7, Moon urged the government to amend the Capital Markets Act and the Commercial Act, saying the proposed changes were critical to ensure fairness in the domestic market.

Source: The Korea Herald

Shinhan Financial Group will raise $200 million for two KKR funds of funds (FoFs) tailor-made for the South Korean banking group, under a strategic partnership in which Shinhan plans to scale up alternative investment. KKR will invest them in a variety of its global investment products, with Shinhan involved in every decision-making process for the FoF management.

One of the two FoFs, with a term of 15 years, is a $150 million private equity fund, Shinhan said on January 9. Shinhan Bank, Shinhan Financial Investment, Shinhan Life Insurance and Organge Life Insurance participated as limited partners via Shinhan Alternative Investment Management.

The second FoF will collect $50 million for real estate and infrastructure portfolio from the subsidiaries of Shinhan. Orange Life, which Shinhan took over for W2.3 trillion ($2 billion) in 2018, contributed $100 million, or half of the commitments, according to Yonhap Infomax.

Source: Korean Investors

Low interest rates and a looming new set of accounting standards has created increasingly tough circumstances for insurers, leading to many small and medium-sized firms to be put up for sale.

The IFRS 17, which will replace the current accounting standards for insurance contracts in 2022, requires insurers to secure a greater amount of capital. This is because liabilities in their insurance contracts will be measured by market value instead of book value.

Under the current low interest rate, insurers are seeing profits from investments fall. Premium income is falling, as they have stopped selling savings-type policies. Under the IFRS 17, such policies will be counted as liabilities.

Source: Korea Times

Outbound foreign investment by South Korean financial and insurance companies amounted to W19.86 trillion ($16.97 billion) in the first nine months of 2019, surpassing the figure for the whole of 2018 by W260 billion, data released by the Export-Import Bank of Korea on January 6 show.

Overseas investment by Korean financial and insurance companies has continued to expand recently. The figure increased from W10.4 trillion in 2016 to W15.4 trillion in 2017 and W19.5 trillion in 2018. Financial investment companies led the growth in overseas investment. Financial holding companies, credit card firms and finance businesses also invested overseas.

Source: Business Korea

SINGAPORE

Sovereign wealth fund GIC acquired an additional 24% stake in Dexus Australian Logistics Trust for A$366.1 million ($253 million), increasing its interest in the unlisted trust to 49%.

The investment, which surfaced in a stock exchange disclosure by the manager of the trust, came just over a year after the vehicle was set up as a joint venture between GIC and Australia’s Dexus Reit. The Singaporean fund’s initial stake comes with put and call rights to acquire an additional 24% by June this year.

According to Dexus, the trust has an active acquisition and development mandate that targets core logistics properties in strongly performing areas in Australia with good access to transport networks.

Source: Mingtiandi

In addition, GIC has reportedly hired real estate services firm JLL through its Spain-based subsidiary P3 Logistics for a planned sale of its €100 million ($111 million) assets in the logistics park.

Spanish media outlet El Confidential reported that the Singapore sovereign investor has evaluated the divestment for months and could initiate the process in January with JLL’s involvement.

The assets accounted for close to half of the total value of P3 Logistics Parks. GIC acquired P3 from TPG Real Estate and Ivanhoé Cambridge for €2.4 billion ($2.67 billion) in 2016.

Source: Deal Street Asia

State investor Temasek has teamed up with Canada’s Brookfield Asset Management to bid for Thyssenkrupp’s €15 billion ($16.6 billion) elevator division, according to two people familiar with the matter.

Brookfield and Temasek both declined to comment. Thyssenkrupp plans to sell or list ahead of a January 13 deadline for binding bids.

Rival bidders for the troubled industry player’s elevator unit include a consortium consisting of Blackstone, Carlyle and the Canadian Pension Plan Investment Board, according to sources. Thyssenkrupp has been under pressure after several profit warnings, and the elevator unit is the group’s most profitable asset.

Source: Reuters

Temasek has also led a $40 million investment in New Zealand-based Soul Machines, an artificial intelligence company that develops digital avatars to aid businesses’ client engagement.

The company said in a statement that European venture capital firm Lakestar and Salesforce Ventures joined the investment round, alongside existing investors Horizons Ventures, University of Auckland Inventors Fund and others.

The company had raised a $7.5 million Series A round led by Horizons Ventures in 2016.

Source: Deal Street Asia

INTERNATIONAL (EXCLUDING ASIA)

Coal Pension Trustees (CPT), which runs the UK’s two legacy coal industry retirement funds, has chosen Green Court Capital Management and AQR as its first two dedicated China A-share managers, its chief investment officer has told AsianInvestor.

Green Court is a sub-investment manager of US-based Neuberger Berman and AQR is a Connecticut-based quantitative fund house. CPT, which had £21 billion ($27 billion at the time) under management as of early last year, will soon publish the details on its website, said Mark Walker, CIO.

He told AsianInvestor in March that CPT was selecting two firms to run its first A-share portfolios and would be awarding a total portfolio of £100 million to £200 million between them.

Source: Coal Pension Trustees

The new chief executive of Ontario Municipal Employees’ Retirement System (Omers) says the Canadian fund’s “big growth will be in the high-growth stories in India and pockets of Asia”.

Omers’s plan to double its assets under management to C$200 billion from around C$100 billion in the next seven to 10 years, said Blake Hutcheson, who was appointed CEO in December. Some 30% of the fund’s portfolio remains in Canada compared to just 5% in Asia, he added.

This is reflected by personnel expansion in the pension fund’s Singapore office in recent weeks, in the form of a new capital markets team and the addition of another private equity specialist.

Source: BloombergAsianInvestor

The 100 largest US defined benefit corporate pension plans have seen a slight drop in their funded status despite posting a better-than-expected annual return of 15.66% last year, following a loss of –2.94% in 2018, according to consultancy Milliman.

The Milliman 100 PFI schemes’ asset value stood at $1.618 trillion at year-end 2019, while their liability value was $1.819 trillion, producing a funded ratio of 89.0%, down from 89.4% at end-2018.

The drop was down to sharply decreasing discount rates that resulted in an overall $30 billion drop in funded status. The Milliman 100 discount rates fell 99 basis points to 3.20% at the end of 2019 from 4.19% at the end of 2018.

Source: Milliman