China’s $240 billion National Council for Social Security Fund (NCSSF) has awarded its first batch of overseas mandates in more than four years.
The manager of the National Social Security Fund has dished out four mandates overall to US-based Vanguard, French house Amundi and the Hong Kong subsidiaries of DaCheng Fund Management and China Universal Asset Management.
Vanguard and Amundi both won passive mandates for exchange traded funds and indices, although NCSSF didn’t disclose details on the asset classes.
The Hong Kong units of DaCheng and China Universal won placements for primary and secondary equity market deals and convertible bonds. It is understood these will primarily focus on Hong Kong equity.
The council provided no further details, although AsianInvestor understands each mandate is less than $1 billion in size. The mandates were signed on December 4 and announced by NCSSF on December 14.
This represents the first overseas venture for NCSSF since July 2012, with the council needing to boost its international allocation on the back of RMB devaluation.
Since 2006 NCSSF has appointed 33 global fund houses to manage overseas assets. Its most recent round of 13 global mandates – issued to 12 international managers in July 2012 – included global multi-asset, emerging market local currency bonds, natural resources equities and global real estate equities.
Although the latest overseas mandates appear relatively smaller compared to previous issues, the source noted that Chinese institutions were finding it more difficult to raise their international allocations amid high demand.
“Many institutions want to increase global exposure, but they are having to do it step by step,” he said. “Demand is high, but the [foreign exchange] regulator has concerns about capital outflows. That is why QDII and RQDII were suspended, and the official timing of starting QDII2 is uncertain.”
China’s State Administrative of Foreign Exchange (Safe) froze fresh quotas for the qualified domestic institutional investor (QDII) scheme in September, and reportedly has also suspended fresh quotas for the renminbi-denominated QDII programme.
Safe has confirmed that the Shanghai free-trade zone will support the start of QDII2, the outbound investment scheme for wealthy individuals, but has not confirmed an official launch date.
NCSSF manages two provincial mandates, from Guangdong and Shandong public pension funds. However, it is expected to receive more and to seek more external onshore and offshore managers on the back of pension fund reform due to be implemented next year.
To date NCSSF has only issued global mandates for equities and fixed income in the public markets, although it is forecast to expand into overseas alternatives including private equity. The council launched a public consultation on proposed rule changes last December, but an official announcement has not been forthcoming.
NCSSF managed total assets of Rmb1.54 trillion ($238 billion) at the end of 2014, of which the vast majority (Rmb1.24 trillion) was for NSSF.