Taiwan’s Bureau of Labor Funds (BLF) is looking to issue request for proposals for two global investment mandates on infrastructure and multi-asset before the end of this year, with the intention of appointing five fund managers to each mandate, deputy director general Liu Li-ju told AsianInvestor. 

The new mandates reflect in part a desire by the pension fund to gain some new partners, after a number of existing fund managers failed to meet the set benchmark returns for outstanding infrastructure and multi-asset mandates. 

Liu Li-ju

If there’s not another wave of the coronavirus outbreak, BLF aims to invite bids for the two mandates by year-end and issue them early next year, Liu of the NT$4.3 trillion ($145.5 billion) state pension fund said.

The exact sizes of the two mandates are not decided yet, but each is likely to be a little under $2 billion. The infrastructure mandate should be smaller in size among the two, because it only focuses on one single type of asset and there are not many infrastructure-dedicated fund managers in the market, Liu said.

The two mandates should be using an active strategy and each of them will be split among five asset managers. She noted that five is an optimal number given BLF’s investment scale.

Bringing in a set of managers would also help to ensure the investment styles they employ are different, and that the underperformance of one or two of them has a smaller impact on the overall investment mandate, she said.

There are two main reasons for issuing the mandates. For one thing, BLF wants to raise its allocation to alternatives. The asset now makes up 11% of its NT2.4 trillion labor pension fund, the biggest fund among the six funds under its management. However, the target level should be 13%, said Liu.

“Our alternatives are under-allocated. So we’ll do alternative mandates by the end of this year,” she noted. 

INVESTMENT DISAPPOINTMENT

In addition, BLF has not been satisfied with the investment performance of some asset managers that it previously appointed to conduct infrastructure and multi-asset investments on its behalf. It plans to replace them as the mandates will expire soon.

“Some of them are very good, but some are really quite nerve-racking. Therefore after five years, not everyone will stay….so we have to find new ones,” Liu said.

BLF appointed four managers each for a global infrastructure mandate and a global multi-asset mandate in 2015 and 2016. The mandates are for its labor pension fund and labor retirement fund. Half of the fund managers have not been able to meet the benchmarks (see table below).

Cohen & Steers, Macquarie, Allianz and Pinebridge declined to comment on their underperformance.

BLF’s global infrastructure investment mandate
 
BLF’s global multi-asset investment mandate (absolute-return mandate; target return is 25.85%)