Taiwan’s BLF plans $4.4b in local and foreign mandates
Taiwan’s state pension, the Bureau of Labor Funds (BLF), plans to invite bids for a domestic investment mandate worth at least NT40 billion ($1.42 billion) and possibly more than one offshore mandate worth up to $3 billion this year, according to Liu Li-ju, the pension fund’s deputy director-general.
“We are still waiting for the appropriate time to launch the $1.42 billion domestic mandate since the current valuation of the [Taiwan] stock market remains high, and we have yet to see any adjustments downwards,” Liu told AsianInvestor.
However, she added that the pension fund may announce details of this mandate, which will focus on equity investments with an absolute-return target strategy, in the second quarter at the earliest, depending on market movements.
Indeed, the Taiwan Capitalisation Weighted Stock Index has seen robust gains, climbing from the low point of 8,681 on March 19 to the current 15,802 level (February 10), a near 82% jump in less than a year.
For the overseas mandate, the pension fund has yet to decide on the timing of its launch. “We don’t want to rush into overseas investing this year, given that we still have several mandates which are yet to be funded .”
Liu added that Taiwan’s biggest pension fund is also taking a prudent approach and will slow down its process of appointing new asset managers following its bribery scandal last November.
Yu Nai-wen, a director at its domestic investment division, allegedly accepted bribes from PJ Asset Management executives to buy Far Eastern Group shares. On Monday (February 8), Yu and 16 other defendants were sued by Taiwan’s government.
Consequently Tsay Feng-Ching, the director general of BLF, the pension fund's most senior executive, will step down from his post at the end of this month, confirmed Liu. She declined to provide details of Tsay’s replacement, adding that potential candidates will be shortlisted from civil servants.
Lin San-quei, the vice minister of Labor department of Taiwan, is now acting as interim head.
The scandal led to a series of measures to strengthen BLF's internal controls. “We felt very disappointed and resigned about selecting asset managers who hadn’t used effective compliance and transparency when investing,” Liu said.
She stressed that BLF is conducting more frequent reviews of its current asset managers to spot reliable ones for future mandates, instead of naming new fund managers in a rush. Currently, approximately 50% of its managed assets are outsourced to external asset managers, and among the external managers, 37.5% are non-local players, she added.
“We really want to increase our non-local asset managers' exposure. However, we do have some limitations as we have to adhere to regulatory policies," said Liu. She pointed out that non-local firms provide a higher level of compliance in general.
The management reshuffle could bring another challenging year for the pension fund. “They were our top performance managers, and we need time to rebuild confidence," Liu said.
SHORTLISTING 2020 MANAGERS
Separately, Liu told AsianInvestor that BLF plans to announce the final list of selected managers for two overseas mandates next month.
In October last year, BLF invited bids for two overseas mandates — a $1.64 billion global infrastructure securities mandate and a $2.3 billion global multi-asset portfolio, both adopting active strategies.
“We’ve shortlisted the managers, and we might need three more months to deploy the funds due to some operational and administrative procedures,” said Liu.
In 2020, the pension announced five mandates, totalling $9.7 billion, of which $6.24 billion were for offshore investments.
Liu also said that the pension fund is on track to gradually lift investments outside of Taiwan to 60% of its total asset value by 2025. Currently, the domestic market investment makes up 48% of its assets under management (AUM) and overseas investments 52%.
As of December last year, its AUM stood at NT4.9 trillion ($180 million), delivering a 7.46% yield, according to a company statement.