Private credit might be less attractive than it was last year as investors rush into the market, but there are sweet spots to be found.
State Street Global Advisors and Vanguard Investments won the biggest mandates, with each sharing a $200 million quota to run the BLIÆs passive global bond portfolios. Competitors reportedly included BlackRock, Credit Suisse, Pimco and Morgan Stanley Investment Management.
The BLI has granted one $150 million mandate to New York-based boutique Vontobel Asset Management for global emerging markets (ex-mainland China). Competitors had reportedly included Aberdeen Asset Management, JPMorgan Asset Management, MSIM, Principal Global Investors and Wellington Management.
Janus Capital won a $150 million mandate for US equities, reportedly beating out ABN Amro Asset Management, AllianceBernstein, BlackRock, BNP Paribas Asset Management, Deutsche Asset Management, ING Investment Management, RCM and UBS Global Asset Management.
AllianceBernstein did win a $100 million mandate in European equities, however, reportedly beating competitors including Baring Asset Management, Fidelity Investments, GAM, HSBC Halbis Partners, Invesco, Pioneer Asset Management and Schroder Investment Managers.
Lastly, Invesco won a $65 million mandate for Japanese equities - perhaps the biggest surprise, as market participants had expected a Japanese house to prevail; DaiwaSB Investments, Diam, Mistubishi UFJ Trust & Banking, Nikko Asset Management and Nomura Asset Management are said to have pitched.
Fund houses entering the tender were required to meet the AUM requirement of over $5 billion. Then an internal committee of the BLI reviewed the fund housesÆ performance over the past three years, comparing these to the relevant benchmarks. Tsai Chungchun, general manager of BLIÆs finance department, says, however, the fund houses' ability to achieve the BLI's investment return targets were considered on individual basis.
He declined to discuss fee arrangements, but downplays the role this played in the final selection. ôManagers are chosen by a committee which is formed by external professionals, university professors and other representatives,ö he says. ôThe committee members believe that the selected managers are compatible with our projected goals and we believe they will provide sufficient skills to achieve the target return in the long run.ö
Taiwanese regulators have recently relaxed rules on capital outflows. Tsai says regulators have come to realise the need for institutional investors such as the BLI to access higher-yielding products. The BLI is no longer required to allocate 50% of its assets to local deposits or bonds.
Its quota for international investment has risen from 10% to 35% of AUM, putting pension funds at par with TaiwanÆs insurance companies, which have long been aggressive investors overseas. Tsai would not say when the BLIÆs next overseas investment will come, but its overseas investments now account for nearly 12% of its AUM. He says since 2005, its international portfolios have returned a cumulative 20.4%.
Regulators keep their eyes open on tightening insurance industry by introducing more detailed risk management requirements, which could bring pressure on smaller players.
China and India are more obvious choices for AustralianSuper to consider in Asia Pacific, but the super fund currently lacks the expertise and prefers to stick to the US and Europe.
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Investors are increasingly turning to private companies and private debt in their hunt for ESG alpha, but the age-old problem of transparency and due diligence remains