Taiwan’s Labor Insurance Bureau has unveiled a trio of international fund houses to manage $200 million each in active global equity mandates.
The selected managers are US-based MFS Institutional Advisor, BlackRock Investment Management (UK) and France-based Amundi.
AsianInvestor reported the fund’s RFP this July, noting it would mostly be invested in developed market equities and would boost the institution’s overseas equity portfolio by almost a third.
AsianInvestor was told by BLI yesterday that its investment committee had proposals from around 40 managers and had whittled the final list down to eight, based around four main criteria: people, prices, organisation and service.
We have reported that the finalists were: Amundi; BlackRock; Harding Loevner, a non-US equities boutique in the Affiliated General Managers stable; Harris Investments, a multi-asset unit of BMO Financial; JP Morgan Asset Management; MFS Investment Management; PanAgora Asset Management; and Schroder Investment Management.
BLI was seeking managers that had outperformed the MSCI World Index for the past three years and which specialise in developed markets.
The final decision was actually made in August, although the notice has only just been posted on the bureau’s website. It is listed as BLI’s fourth batch of overseas discretionary investments.
But this is not BLI’s first foray into global equities. It already manages nearly $2 billion in the asset class, both in-house and via a mandate run by Wellington that goes back to 2004. Janus Capital and Vontobel also run BLI money in global and emerging market equities, respectively.
Still, this is the first time the fund has issued an RFP for mature equity markets since 2004.
The term of the total $600 million mandate is five years, and the benchmark is the MSCI World Index – Developed Countries.
As at the end of May, BLI had NT$55.7 billion ($1.93 billion) in overseas equity investments, NT$35 billion of which it manages internally. The new mandates will boost BLI’s overseas equity allocation from 13% to 17% of its total AUM of NT$418.5 billion.
BLI expects the three investment managers to achieve net annual returns 2% higher than the benchmark on a rolling three-year basis, and to keep tracking error within 4-8% a year.
The managers were required to have an operating history of more than three years as of March 31 and have more than $5 billion in AUM worldwide in separate accounts and comingled funds that solely comprise institutional investors.
The managers will be allowed to invest in shares of listed companies traded both on exchanges and over-the-counter markets, as well as exchange-traded funds and real estate investment trusts. Investments in convertible bonds are not allowed unless obtained through corporate actions.
Managers will also be allowed to use derivatives up to a certain level and will not be allowed to short or use leverage.
In its investment guidelines, BLI specifies that the first stop-loss point will be triggered when the cumulative return of the portfolio falls below the target return by twice the mean of the tracking error.
If the loss exceeds 30%, BLI will require the return of all or any portion of the fund assets or to terminate the agreement.