Taiwan state pensions issue multi-asset RFPs, mandates
Taiwan’s Bureau of Labor Funds (BLF) is seeking asset managers for domestic absolute-return multi-asset strategies, while the Public Service Pension Fund (PSPF) has awarded its first global multi-asset mandates.
Such diversified strategies are proving popular in the face of uncertainty over issues such as the policy of China’s economic slowdown, the incoming US government under Donald Trump, expected US interest rate rises, Britain’s decision to exit the EU and related concerns over Europe. Many fund managers say unconstrained, flexible portfolios make sense in the current environment.
BLF has invited asset managers to bid to run NT$77 billion ($2.4 billion) in absolute-return strategies for domestic investments for a five-year mandate. The amount will be split between three of BLF’s sub-funds, with NT$35 billion each for Labor Pension Fund (both the new and old schemes) and NT$7 billion for Labor Insurance Fund (LIF).
BLF, an umbrella organisation with $106 billion in AUM, will choose seven asset managers to run NT$11 billion each (NT$5 billion each for the LPF’s new and old schemes and NT$1 billion for LIF).
The investment target will be the average annual dividend yield of all stocks traded on the Taiwan Stock Exchange each year, plus 200 basis points.
Asset managers will be able to invest in domestic stocks, exchange-traded funds that track local indices (including leveraged and inverse ETFs), domestic bonds, stock index futures and options used for hedging or yield enhancement purposes and other items permitted by BLF with written notice. Idle cash can be used to buy short-term bills, bank deposits and other items permitted by BLF with written notice.
Applicants must meet certain criteria* covering areas such as track record and AUM. The deadline for applications is 5pm on February 15.
This RFP follows one that BLF issued in December for its first absolute-return global bond mandates, for a total of $3.6 billion, to counter the impact of rising US interest rates. At the same time it invited bids for a $2.4 billion in ESG equity portfolios.
As of the end of November, the new LPF scheme – the largest single fund under BLF – had 53.97% of its NT$1.67 trillion managed externally and 13.85% of its total portfolio in domestic mandates.
The last round of domestic absolute-return mandates** that BLF granted started investing in March 2015.
Meanwhile PSPF, with NT$566.8 billion in AUM, this week announced the recipients of its first global multi-asset mandates, totalling $600 million. They are AllianceBernstein, JP Morgan Asset Management and Schroders, with each receiving $200 million to oversee for five years.
PSPF had also issued NT$30 billion in domestic equity mandates in July last year, which went to Cathay Site, Fubon Asset Management, Fuh Hwa Sitc, HSBC Global Asset Management, Prudential Financial Site and Taishin Securities Investment Trust.
Meanwhile, BLF last week appointed Tsay Feng-Ching, vice-chairman of the board of PSPF as its new director general, effective January 16. Tsay succeeds Huang Chao-hsi, who is retiring after working at the BLF for a decade. AsianInvestor could not ascertain Tsay’s successor at PSPF by press time.
* As of December 31, applicants must have been established for at least three years, have a local licence to conduct discretionary asset management and have AUM of at least NT$10 billion. They must have at least one domestic equity or equity-bond balanced fund with AUM of more than NT$1 billion at the end of each month in the three years proceeding December 31.
** Asset managers running these mandates are: Allianz Global Investors Taiwan, Cathay Securities Investment Trust, Fuh Hwa Securities Investment Trust, HSBC Global Asset Management Taiwan, Sinopac Securities Investment Trust, and Uni-President Assets Management.