Taiwan’s Public Service Pension Fund (PSPF) has invited fund managers to bid for three global multi-asset mandates totalling $600 million by November 22. The three $200 million mandates were detailed in an announcement today.
They will be the first global multi-asset investments made by the NT$554 billion ($17.6 billion) fund, and the first overseas mandates it has issued since July 2014. It awarded no foreign investment portfolios last year, but did issue a NT$30 billion domestic equity request for proposal in July this year.
Another state pension manager in Taiwan, the $110 billion Bureau of Labor Funds, issued its first global multi-asset mandates, totalling $3.2 billion, in December 2015.
Multi-asset on uptrend
Such strategies have been attracting growing attention from Asian investors in the past few years. Multi-asset fund managers expected a surge of inflows from Chinese insurers as early as the first half of 2014, and China Life handed out global multi-asset mandates in February 2015. And Thailand's Government Pension Fund issued its first multi-asset mandate in August 2014.
Meanwhile, fund houses have been positioning their multi-asset presence to capture the trend in the region. Just this month China Asset Management teamed up with Russell Investments to develop funds of funds, aiming to push its multi-asset capabilities. Schroders and Aberdeen hired Asia heads of multi-asset strategies in January and April this year, and Singapore-based Fullerton made a similar move in March.
Multi-asset products domiciled in Asia ex-China have surged in popularity in the past two years, posting net inflows of $12.2 billion in 2015 and $7.2 billion in the first eight months of this year, according to research house Morningstar.
PSPF's new multi-asset portfolios will be for five-year terms. The institution will conduct quarterly reviews starting a year after the mandates are awarded, and will only accept in any given review period an 8% annualised standard deviation from the benchmark, which is US dollar three-month Libor plus 5%.
Asset managers will be able to invest in listed stocks or those traded over-the-counter, beneficiary certificates (including exchange-traded funds), central government bonds, corporate bonds (including convertible bonds), debentures issued by banks, asset securitisation products, private equity, derivatives used for hedging or investment enhancement, and other items to be added by PSPF with written notice.
Idle cash can be used to buy Treasury bills, short-term bills, bank deposits, repurchase and reverse repurchase trades of government bonds, and repurchase and reverse repurchase trades of short-term bills.
Each financial group can have only one asset management firm bidding for the mandates. Applicants must have been around for three years and manage at least $5 billion in assets as of end-June. Also, a manager will only qualify if their existing global multi-asset portfolios achieve over US dollar three-month Libor plus 5% aggregate annual returns.
Applicants must either have operation footholds in Taiwan or be able to appoint domestic asset managers as their service team. In either case, they should have at least three people in their client service teams.
PSPF portfolio breakdown
As of the end of August, PSPF outsourced 36.31% of its NT$554 billion to external managers (10.14% for domestic portfolios, 26.18% for global). For the assets managed in-house, 17.05% of its overall AUM was in equity, index funds and beneficiary certificates (14.23% domestic and 2.82% international) and 17.84% in fixed income (9.49% domestic and 8.35% international). The remaining 28.8% was in bank deposits, treasury bills and commercial paper.
The last foreign mandates issued by PSPF were eight portfolios totalling $1.6 billion in 2014: four for low-volatility and high-dividend income equity and four for real estate equity and infrastructure equity. The chosen managers were Allianz Global Investors, BlackRock, Cohen & Steers, Cornerstone, Deutsche Asset Management and UBS Asset Management.
The last domestic equity mandates, issued in July this year, were handed to Cathay Securities Investment Trust, Fubon Asset Management, Fuh Hwa Securities Investment Trust, HSBC Global Asset Management, Prudential Financial Securities Investment Trust Enterprise and Taishin Securities Investment Trust.
Overall, PSPF uses the following managers for foreign mandates: Allianz Global Investors, Amundi, Ashmore, BlackRock, BlueBay, Cohen & Steers, Cornerstone, Deutsche AM, Fidelity, Invesco, Schroders, Stone Harbor, UBS AM and Vontobel.
The mandate types are global equity, Asia Pacific equity, emerging-market equity, corporate bond, emerging-market bond, high-dividend equity, low-volatility equity, infrastructure and real estate.
The following are PSPF's domestic mandate managers: Allianz Global Investors, Cathay Securities Investment Trust, Fubon Asset Management, Fuh Hwa Securities Investment Trust, HSBC Global Asset Management, Prudential Financial Securities Investment Trust Enterprise, Schroders, Taishin Securities Investment Trust and Uni-President Asset Management. Mandate types are absolute- and relative-return equities.