China’s $283 billion state pension fund has invited eligible asset managers to pitch for the first mandates under the forthcoming public pension fund (PPF) scheme, which are scheduled to be awarded by the end of this year.
The National Council for Social Security Fund (NSCCF) posted the invitation on its website on Wednesday (October 26), the day after the Ministry of Human Resources and Social Security (MoHRSS) revealed its schedule for PPF mandates, the first of which are slated to be awarded this year.
Eligible applicants include NCSSF’s existing fund or enterprise annuity managers, with at least three years’ experience, but industry observers expect the PPF scheme to open up to more firms.
Overall, 25 domestic asset managers – including 16 fund houses, two brokerages, four pension and annuity managers and three insurance asset managers – are now eligible.* CCB Pension, a joint venture between China Construction Bank and NCSSF, is likely to be excluded, as it received its EA licence in January and was only one managing EA portfolio as of March.
NCSSF required managers to submit their applications with their existing mandates and EA scheme contracts by October 31. A committee will select the first batch of external managers and announce them publicly before the end of the year.
This comes after Beijing earlier this month launched occupational annuities, a new pension scheme for civil servants, under which EA managers will run mandates for provincial governments.
EAs – China’s equivalent of the US’s 401(K) retirement plan – are defined contribution schemes for both state-owned and private companies, and were set up in 2004. They had a total of Rmb953 billion ($140 billion) under management as of March.
New opportunities expected
Fund houses will be keeping a close eye on China’s retirement scheme reform, particularly as the NCSSF prepares to expand its existing pool of external managers, said Shanghai-based consultancy Z-Ben Advisors in a note.
Despite the expectation that the PPF mandates will be opened up to more managers, this is only likely to happen when the the fund selects the second batch of external managers.
Foreign firms can only access China’s public pension segment via their onshore joint-venture fund house or pension investment manager. For example, in 2014 Australia’s AMP Capital bought a 20% stake in China Life Pension, which is now the second largest EA manager. Meanwhile, Canada’s Manulife and US-based Principal Financial are considering forming onshore JVs to gain access to this segment.
*The existing 16 managers appointed by NCSSF are, according to mandate size: Harvest, ChinaAMC, Bosera, E Fund, ICBC-Credit Suisse, China Southern, Penghua, HFT, Fullgoal, Yinhua, GF Fund, China Merchants, Guotai, Chengsheng, China Universal and DaCheng. The two eligible brokerages are CICC and Citic Securities. The four EA managers are Ping An annuity, China Life Pension, Taiping Pension and Changjiang Pension. The eligible insurance investment units are Taikang AM, PICC AM and Huatai AM.