Taiwan's BLF bets on global equities with $2b mandate

Taiwan's Bureau of Labor Funds is taking on more risk through its passive equity mandate as it banks on a rally in global equity markets.
Taiwan's BLF bets on global equities with $2b mandate

Taiwan’s Bureau of Labor Funds (BLF) is seeking bids for its global passive equity mandate -- its first this year -- as it bets on the recovery of global equity markets. 

It plans to allocate a total of $2 billion to managers for a five-year term, dividing $1.6 billion among four selected managers for Labor Pension Fund at $400 million each.

Another $400 million will be mandated to four managers for the National Pension Insurance Fund, with $100 million for each manager.

It will be benchmarked against MSCI All Country World Index (ACWI). The investment scope includes stocks, ETFs, and REITs. 

Last year MSCI ACWI was down 18.4%. Year-to-date it has increased 8.9% as of April 28. 

BLF manages eight pension funds in Taiwan, including six labour funds, which accounted for more than 90% of the total NT$6.1 trillion ($198.6 billion) assets under management (AUM) as of the end of March this year.

Labor Pension Fund is the largest with NT$3.7 trillion AUM by end-March.

According to information compiled by Keystone Intelligence, Labor Pension Fund’s latest expired mandate was a $1.9 billion global low volatility equity mandate managed by BlackRock and State Street Global Advisors. It expired on April 17. 

The mandate managed by BlackRock gained 17.2% under a five-year tenor, while State Street Global Advisors' gained 17% for the pension fund. Both managers beat the benchmark, MSCI World Minimum Volatility Index and MSCI EM excluding Taiwan Minimum Volatility Index, by 1.1% and 0.9% respectively. 

Donna Chen, 
Keystone Intelligence

“If money for the new mandate comes from this expired one, it means that BLF is taking on more risk and is positive about the global equity market, especially the US equity market going forward,” said Donna Chen, president of Keystone Intelligence, a Taiwan-based financial advisory firm.

“Meanwhile, a global equity mandate could help diversify risks,” she told AsianInvestor.  


Compared with an active equity strategy, Chen noted that a passive strategy has generally a much lower management fee but at the same time guarantees a similar performance to the relevant index, or the performance of the overall stock market.

In 2022, BLF suffered a record investment loss of NT$382.1 billion, or 6.68%, versus a 9.67% gain in 2021. It was BLF’s worst annual performance since its inception in 2014.

The new mandate came after the US Federal Reserve last week raised its policy rate by another 25 basis points to 5.0-5.25% but hinted that its rate hike cycle may be drawing to a close.

Analysts said that by dropping its previous announcement that “the committee anticipates some additional policy firming may be appropriate”, the Fed was signalling that it was drawing a line under interest rate rises.

Instead, the Fed said its policy in the near future will be more data-driven depending on how the US economy unfolds.

“Generally speaking, the end of rate hike or even a decreasing rate is a positive for global equity market, especially in the US,” Chen noted.

For most global equity indexes, US stocks are a large component. In the MSCI ACWI, US stocks account for 60.5% of the index, even though it tracks large and mid-cap stocks across 23 developed markets and 24 emerging markets.


ESG considerations are also taken into account in the mandate, with the pension fund forbidding invsestments that violate its social responsibilities, including but not limited to tobacco, alcohol, arms, gambling, and pornography.

Deborah Fuhr, ETFGI

“In case of violation, the Bureau will, at its sole discretion and depending on the circumstances, reduce the mandated amount or terminate the contract,” BLF said in the investment guidelines.

Deborah Fuhr, founder and managing partner of ETFGI told AsianInvestor that a lot of pension funds globally are looking at passive investment products, such as ETFs, to implement ESG screening. 

In addition, investments in mainland China should not exceed 10% of the assets under management for each manager.

China accounts for 3.3% of the MSCI ACWI index.

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