Taiwan’s $18.5 billion Public Service Pension Fund (PSPF) is considering further investments in global equities this year, a move that will entail the hiring of external managers.
Speaking to AsianInvestor on the sidelines of the annual IMAS conference in Singapore yesterday, PSPF vice chairman Feng-Ching Tsay said it is eyeing global equities as it diversifies following its allocation to fixed income-generating assets last year.
In addition, Tsay sees factors such as the expected US interest rate hike and the decline in oil prices as favourable to equities.
When asked about the potential size of the mandate, Tsay said: “We haven’t made a decision yet on overseas investment mandates. We have to watch the Fed’s action on interest rates first.”
“What I can say is we want a little more global equities to diversify. In addition to the Fed’s rate policy, the low oil prices will drive the equities return as it will drive consumer spending. We also have to consider the geopolitical risk,” he added.
PSPF has approximately $600 million invested in global equities, Tsay said. It invested in overseas real estate & infrastructure and high dividend securities last year to get the fixed income stream in a volatile market environment.
Tsay said about 12 external managers ($200 million each) were hired for high dividend solutions and four for overseas real assets and infrastructure ($150 million each).
The fund was also increasing its investments in domestic equities. It asked fund managers to submit proposals for domestic equity mandates ($5 million each) in December last year, as reported.
Under those mandates, applicants needed to have been around for three years and manage at least NT$10 billion ($320 million) of assets as of the end of October. The domestic equity funds must have had a three-year average return beating peers’ performance.
Taiwan’s PSPF is the third-largest pension fund in Taiwan. It changed from a totally government-financed system to a contributory pension fund supported by funds jointly contributed by the government and the participants in 1995.
Pension Fund participants comprise civil servants, education workers and military personnel (political appointees withdrew from the Pension Fund by law from 2004), totaling more than 620,000 individuals.