Weekly Digest: Canada pension funds questioned on China investments
TOP NEWS OF THE WEEK
British Columbia Investments (BCI) and the Ontario Teachers’ Pension Plan, two of Canada’s largest public pension funds, testified that they have paused direct mainland investments as tensions rise between Beijing and Ottawa at a Canadian parliamentary committee on Canada–China relations on May 8.
Stephen McLennan, executive managing director of total fund management for Ontario Teachers’ told the committee that the C$247-billion ($183-billion) pension fund has scaled down its portfolio allocation to China to just 2.3%, and its property investment subsidiary Cadillac Fairview has also put a pause on further investment in the region.
Daniel Garant, executive vice-president and global head of public markets at BCI, which invests in real estate through its QuadReal Property Group told the same panel that the C$211 billion ($156 billion) fund has also decided to pause further investments in China.
McLennan cited the changed post-COVID economic environment, regulatory uncertainty in China and the continued deterioration of the country’s relations with the US and Canada as the main factors that led to a rethink of strategy.
Meanwhile, representatives from Canada’s two largest pension fund managers—CPP Investments and Caisse de dépôt et placement du Québec (CDPQ)—told the committee that despite notable risks, their funds were not prepared to take similar action with China and they see significant opportunities for investment.
Source: Parliament of Canada
OTHER INVESTMENT NEWS
AUSTRALIA
Cbus Super has successfully completed its merger with EISS Super, adding the latter’s 17,000 members to the fund, as announced on May 15.
The completion of the merger comes about 18 months on from the funds signing a Memorandum of Understanding in December 2021. The MoU followed EISS Super being told by regulator APRA that it must merge, and a subsequent failed merger attempt with TWUSUPER.
Cbus now manages more than A$80 billion ($53.3 billion) in retirement savings.
This is the second merger Cbus has completed in just over one year, following a merger with Media Super in April 2022.
Source: Cbus Super
Australia's 30 biggest pension funds in 2022 raised their investment to more than A$34 billion ($23 billion) in companies most responsible for expanding fossil fuels, environmental activist group Market Forces said.
The superannuation or retirement funds increased by 50% over the past year their investment exposure to both Australian and foreign companies developing new or expanded coal, oil and gas projects, the group said in a report published on May 7.
Some funds have committed to achieve net zero carbon emissions in their investment portfolio by 2050.
Commonwealth Super Corp, AustralianSuper, Australian Retirement Trust, Aware Super did not immediately respond to Reuters' requests for comment.
Source: Reuters
BANGLADESH
Life insurance companies in Bangladesh have continued to put more than half of their investments in treasury bills and bonds in the absence of diversified investment opportunities, official figures showed.
Government bonds and bills accounted for 54%, 52% and 53% of the total investments of insurers in 2020, 2021 and 2022 respectively, according to the Insurance Development and Regulatory Authority (IDRA).
An IDRA document showed that in the last three years, 35 life insurance companies that operate in Bangladesh parked most of their funds in government securities, fixed deposits, stock markets and policy loans and purchasing land, buildings, flats.
Land and other properties accounted for 8.39% of their investments last year, up from 8.01% in 2021.
Source: The Daily Star
CHINA
Chinese local governments are wooing Middle Eastern and Asian sovereign wealth funds as they struggle to raise money at home to stimulate economic development after the pandemic.
Local government officials have held high-level meetings with the Qatar Investment Authority, subsidiaries of Saudi Arabia’s Public Investment Fund and the Abu Dhabi Investment Authority, according to wealth fund officials, business executives and Chinese local government officials briefed on and involved in the discussions.
Other Asian state investors, including Singapore’s GIC, have also fielded approaches about opportunities.
Source: Financial Times
HSBC has agreed to buy out its China fund management joint venture partner, two people familiar with the matter said, as the Asia-focused bank pushes ahead with expansion in the world's second-largest economy.
HSBC, which owns a 49% stake in HSBC Jintrust Fund Management, has signed an agreement with Shanxi Trust under which the Chinese state-owned company will sell its 51% holding in the joint venture to the bank, said the sources.
The transfer is subject to a public auction of the shares and regulatory review and approval, said the sources, who declined to be identified as they were not authorised to speak to media.
Source: Reuters
JAPAN
Danish pension fund AkademikerPension, Norway's Storebrand Asset Management and Dutch pension investment company APG Asset Management want Toyota to commit to a comprehensive, annual review of its climate-related lobbying.
That would include a report detailing whether such lobbying, including through industry associations and public statements, reduces risks for the company from climate change and aligns with the goals of the Paris Agreement as well as Toyota's own goal of carbon neutrality by 2050, they said in a statement.
"We're concerned that Toyota is missing out on profits from soaring EV sales, jeopardising its valuable brand and cementing its global laggard status," said Anders Schelde, AkademikerPension's chief investment officer.
Source: Reuters
KOREA
National Pension Service's (NPS) returns on alternative investments last year underperformed the benchmark by more than 300 basis points, slashing the relative value of the whole assets.
NPS’ alternative investment returns last year outperformed the benchmark by 3.15 percentage points, according to the health ministry and the pension fund on May 11.
The alternative assets, comprised of equity, debt, real assets and hedge funds in the private markets, achieved an 8.9% return last year; the other asset classes posted losses.
The relative value of its alternative investment was impacted as the consumer price index-linked benchmark surged amid inflation. While local equities and overseas bonds in NPS portfolio outperformed their respective benchmarks by 47 and 91 basis points last year, the overall investment returns underperformed by 0.2%.
Source: Korea Economic Daily
Construction Workers Mutual Aid Association has issued a request for proposals from global secondaries fund managers, as the fund aims to commit $25 million each to three managers.
The asset managers should each manage at least $300 million in secondaries and have at least five years of experience in the field. The deadline for proposals is May 24. Chosen managers are slated to be announced in middle of July.
Source: Construction Workers Mutual Aid Association
Korean institutional investors are expected to invest more than W1.3 trillion won ($1.4 trillion) in an infrastructure investment fund raised by European private equity firm Antin Infrastructure Partners SA.
National Pension Service (NPS), is expected to invest €500 million, followed by Korea‘s sovereign wealth fund, Korea Investment Corporation (KIC), which will invest a significant amount of money, according to unnamed sources.
Other institutional investors, such as the Korea Teachers’ Credit Union, and major insurance companies, including Kyobo Life Insurance and KB Insurance, are likely to put in funds worth a combined W50 billion to W100 billion.
The European firm’s flagship fund targets a return in the mid-10% range. Antin Infrastructure Fund V hopes to raise €10 billion euros ($11 billion).
Source: Maeil Business News Korea
MACAU
Macau’s Provident Fund Scheme for Workers in the Public Services said it will add a Chinese government bond fund, the HSBC Global Funds ICAV - China Government Local Bond Index Fund, as a new investment option to increase the flexibility for government employees to diversify investment risks.
The arrangement will be effective in June.
The new fund invests in bonds issued by China’s central government and three Chinese policy banks (China Development Bank, Export–Import Bank of China, and Agricultural Development Bank of China).
Source: Macao SAR Government
SINGAPORE
A digital infrastructure provider backed by state-owned investment firm Temasek is considering raising as much as $1 billion in a funding round before its potential initial public offering, according to people with knowledge of the matter.
ST Telemedia Global Data Centres has held talks with potential advisers on the fundraising as it’s keen to bring in strategic investors, the people said.
STT GDC is one of Asia’s largest data center operators, managing more than 170 facilities in Singapore, India, China, Thailand, South Korea, Indonesia, Japan, the Philippines and the UK, its website shows. Temasek fully owns Singapore Technologies Telemedia Pte, the parent of STT GDC.
Source: Bloomberg
Sovereign wealth fund GIC Pte has emerged as the frontrunner to buy a stake in Messer SE, a deal that could value the German industrial gas maker at more than $10 billion, people familiar with the matter said.
The investment firm is in talks to inject about €2 billion ($2.2 billion) into Messer in return for a 20% stake, the people said, asking not to be identified because the information is private.
While GIC is currently seen as the most likely investor, EQT AB was also shortlisted and remains interested.
Source: Bloomberg