NCSSF picks managers for first PPF equity mandates

China's flagship retirement fund has selected the domestic asset managers to run the equity portion of the new Public Pension Fund scheme, reports state media.
NCSSF picks managers for first PPF equity mandates

The National Council for Social Security Fund (NCSSF), which oversees China’s public pension assets, has reportedly chosen the firms that will manage the Rmb15 billion ($2.23 billion) equity portfolio under the new Public Pension Fund (PPF) scheme. 

The enhanced index and value stocks strategies will each be run by four domestic fund houses, said the state-owned Securities Times. The managers of the value mandate are Bosera Asset Management, China Asset Management, Dacheng Fund and Yinhua Fund Management. Each has around Rmb2 billion of investment quota.

The article did not name the four managers of the enhanced index mandates, but said each had received Rmb1.25 billion ininvestment quota, totalling Rmb5 billion. 

The report said PPF may hand out dividend-stock mandates in the future, quoting the unnamed source.

NCSSF did not respond to requests for comment by press time.

As of June 30, NCSSF had signed contracts to run mandates for eight provinces and municipal authorities, which will hand Rmb410 billion ($60 billion) to the fund, said Lu Aihong, vice head of research at the Ministry of Human Resources and Social Security (MoHRSS) on July 28. 

It has received Rmb172 billion so far, of which about Rmb60 billion will be run by NCSSF in-house, and the remaining Rmb110 billion by external managers, said the Securities Times, quoting a source familiar with the matter.

Of the Rmb110 billion, Rmb15 billion (14%) is for equity mandates and the other Rmb95 billion for fixed income investments.

The article did not say whether managers had been chosen for the PPF bond mandates, which will allocate to money markets and bonds.

NCSSF was originally reported, in February, to be planning to assign Rmb10 billion to domestic equity investment managers, but the amount has since been expanded.

The latest Securities Times report said the external PPF mandates would have an equity weighting of 14%. NCSSF has set a bold target of a 95% probability of positive investment returns from the PPF scheme, hence the low allocation to equities.

Overseas and private-market push

However, Beijing is thinking about expanding the PPF’s investment scope to private and overseas markets.

Moreover, NCSSF is looking to win approval this year to invest in overseas private equity, with the aiming of boosting investment performance. The fund saw its return drop to 1.73% in 2016 from 15.19% in 2015, amid lacklustre domestic stock markets.

Given NCSSF chairman Lou Jiwei’s background at China Investment Corporation (CIC), it’s natural that he would push for more exposure to overseas private markets, a greater China head at a global custodian bank told AsianInvestor

CIC, China’s sovereign wealth fund, had about 37% of its overall portfolio in alternative assets as of end-2016. Lou became NCSSF chairman in November last year, having been chairman of CIC from September 2007 to March 2013.

NCSSF’s foreign asset weighting slightly increased to 6.66% at end-2016 from 5.93% the year before. But the total value of its foreign portfolio increased by 12% in US dollar terms.

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