China’s National Council for Social Security Fund (NCSSF) has set up two more departments in preparation for the forthcoming public pension fund (PPF) scheme and is seeking 29 staff, six of those for the new units.
But industry observers suggest the state institution may struggle to attract investment talent because public-sector salaries are lower than at private firms. As a result of this – and the expected growth of assets – the institution is tipped to use external fund managers to run PPF mandates. These mandates are expected to total Rmb2 trillion ($307 billion) in the coming few years, representing 56% of the Rmb3.56 trillion urban and rural PPF pool.
The new NCSSF departments are for PPF investment management and PPF accounting, comprising six staff; three for each unit. There will also be hires to cover domestic securities (two), direct and equity investments (four) and foreign investments (two for fixed income and one for public equities). The other 14 individuals will be for functions such as legal and compliance, HR and IT.
This expansion of resources comes as NCSSF plans to move into new types of assets, such as interbank negotiable certificates, and to boost its exposure to alternatives such as direct investments and private equity funds.
The two new departments were set up to lead the PPF pool investments, said Zheng Bingwen, director of the Center for International Social Security Studies at the Chinese Academy of Social Sciences, a government think tank. NCSSF started setting up the departments last year, as reported in AsianInvestor magazine last December (see article, ‘China pension to spur chain reaction’).
There has been speculation in Chinese media that PPF mandates will be handed out in this year. Local governments are gathering contributions at provincial and city level, noted Zheng, and NCSSF will manage these assets.
Wealthy provinces such as Jiangsu, Liaoning, Shanxi, Sichuan and Zhenjiang and municipal cities such as Beijing and Shanghai are likely to be first to hand out mandates, since they have each accumulated more than Rmb100 billion in PPF contributions, said Wang Hui, an analyst at China International Capital Corporation.
NCSSF has already handed 16 mandates to domestic managers – Changsheng Fund, China AMC, China Merchants Fund, China Southern, China Universal, DaCheng, E Fund, GF Fund, Guotai Fund, Harvest, HFT, ICBC-Credit Suisse, Penghua Fund, Yinhua Fund – and two to brokerages, CICC and Citic Securities.
The new National Social Security Rules took effect on May 1 and confirm that NCSSF will be the single institution responsible for the PPF mandates from provinces across the country.
NCSSF did not response to requests for comments by press time.