TaiwanÆs BLI grants $865 million in offshore mandates

The government has decided to allow pension funds to invest up to 35% of assets overseas.
TaiwanÆs $13.5 billion Bureau of Labour Insurance has granted mandates worth a total of $865 million to six fund houses, out of 76 fund houses that participated in its latest tender. This increases the bureauÆs total outsourced capital from $400 million to $1.62 billion since it made its first overseas foray in 2005. The latest batchÆs capital allocation is based on geography and asset classes.

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%.
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