Taiwan's BLF plans $2bn in alternative mandates

The Bureau of Labour Funds will select managers of real estate and infrastructure securities in the first half, as the $92 billion state pension pool moves to diversify its assets globally.
Taiwan's BLF plans $2bn in alternative mandates

Taiwan’s $92 billion Bureau of Labour Funds (BLF) is to issue at least $2 billion in mandates in the first half of this year, as part of its push to double its alternative investment exposure.

The state institution's new mandates for the coming months are planned for several funds: the Labour Pension Fund (new scheme) (LPF), the Labour Insurance Fund (LIF) and the National Pension Insurance Fund (NPIF). Last year’s mandates for alternative assets were for the Labour Retirement Fund (LRF), an old scheme.

BLF's aim is to reduce its portfolio correlation to traditional assets and thereby secure investment portfolio protection against market volatility, said Liu Li-Ju, deputy director-general of BLF.

The planned mandates will seek managers of real estate and infrastructure securities. This comes after BLF chose four external managers for LRF in April last year, including a total of $200 million for real estate securities and $200 million for infrastructure securities.

BLF had allocated 2.9% of its NT$2.87 trillion ($92 billion) portfolio to alternatives at the end of 2014, up from 2.3% last April. It aims to double its alternatives exposure to 6% this year. Most of that alternatives exposure is run by external firms, but Liu said BLF also manages alternatives internally.

The state fund also plans to raise its overseas equity allocation this year, shaped by a view that risky assets will benefit from the gradual recovery of the global economy. Liu added that equity exposure may surpass bond exposure this year in BLF's overseas allocation.

Of BLF’s total portfolio at the end of 2014, 42% was in overseas assets, including $18.7 billion in bonds, $17 billion in equities and $2.7 billion in alternatives.

It is seeking managers for $2.55 billion in global equity index strategies and $1.8 billion in global enhanced sovereign credit portfolios, as reported. It aims to raise its overseas exposure to at least 45% of its total portfolio.

For its domestic allocation, BLF plans to award absolute-return mandates of NT$30 billion for LPF and LRF separately this year.

BLF now supervises six sub-entities: LPF, LRF, LIF, the Employment Insurance Fund, the Overdue Wages Payment Fund, and the Occupational Incidents Protection Fund, which in 2014 generated investment returns of 6.38%, 7.19%, 5.61%, 1.07%, 1.8% and 0.89% respectively.

It also manages the NPIF, which generated an investment return of 6.03% in the first 11 months of last year.

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