Taiwan’s BLI issues $1 billion overseas custody mandate

Taiwan’s insurance bureau has issued the first overseas investments mandate for its National Pension Insurance Fund (NPIF) to meet its growing overseas asset allocation needs.

The Bureau of Labour Insurance (BLI) published the $1 billion NPIF mandate on its website on Friday. Only one custodian bank will be selected for the five-year management contract, which can be extended at expiration more than once for a further five years.

The NPIF has accumulated total assets under management of NT$107.1 billion ($3.6 billion) as at January 31 this year, of which overseas investments account for NT$23 billion ($780 million), or 21.5%, at present. Bonds account for 20.9% and cash or cash equivalents the remaining 0.6%.

At present NPIF does not engage an external manager to take care of its overseas investments. The bureau confirms that it plans to expand the NPIF’s overseas investment plans, but the responsible office declines to disclose details at the moment.

The NPIF is one of two pension funds under the bureau’s umbrella, the other being the Labour Insurance Fund (LIF), the larger of the two at NT$472.9 billion as at end-January.

LIF has NT$196.2 billion in overseas investments, or 41.5% of its overall portfolio. Its overseas custodian is currently JP Morgan, and the mandate is set to expire this year. 

In terms of NPIF’s new mandate, to qualify foreign institutions should have a local client service team and be established as a branch company with assets under custody of more than $500 billion as at the end of 2011.

If an applicant’s assets under custody are between $3 billion and $500 billion, then it should seek an alliance with another custodian bank whose assets are above $500 billion.

The bureau expects an applicant’s most updated long-term debt credit rating to be at/above “A” by Standard & Poor’s and Fitch, “A2” by Moody’s, or “twA” by Taiwan Ratings Corporation. The deadline for applications is March 22.

Launched on October 1, 2008, the NPIF is primarily for Taiwan nationals aged between 25 and 65 who are not employed in Taiwan, including those living and working overseas, students, housewives and the unemployed.

Such nationals are not covered by labour insurance, farmer’s health insurance, government employees’ insurance or military personnel insurance.