Landmark China pension JV eyes public mandates

China Construction Bank has partnered China's National Council for Social Security Fund to set up a Beijing-based retirement fund management subsidiary, which will be the country’s first full-service pension manager.

CCB Pension Management, launched on Friday, has Rmb2.3 billion ($360 million) in registration capital and is 85% owned by CCB, with state entity NCSSF holding 15%.

The joint venture will be the first institution to secure a full licence for pension management in China, as it already has licences as an enterprise annuity trustee, account manager and custodian for its pension department. 

It is awaiting a pension investment management licence from the Ministry of Human Resources and Social Security (MoHRSS) so that it can carry out investment activities. It is not clear whether CCB Pension will use external asset managers as well as its own in-house capabilities.

Feng Liying, president of CCB Pension, said the firm’s core business would be public pension fund (PPF) management. It will also provide pension trustee and account management.

The new company was generated by a pension department of CCB that focused on EA business. But its partnership with the NCSSF creates a wider scope for the new venture, said Shanghai-based consultancy Z-Ben. 

CCB Pension reportedly said it was in discussion about providing the Beijing municipal government with PPF management services – the agreement is expected to be in place before the end of 2015.

The MoHRSS is moving to implement China’s PPF reform, which will allow up to Rmb2 trillion in PPF assets to invest in financial markets, of which up to 30% can go into equities. Under the ‘Investment Approach’ rules issued in August and due to come in next year, only pension management institutions approved by the State Council can receive PPF mandates.

CCB Pension will be the second institution eligible to run PPF mandates after NCSSF, which is tipped to see significant expansion as a result of the reform.  

CCB Pension received approval from the State Council in December last year, but it is not yet clear whether it can receive PPF investment mandates directly from municipal and provincial governments or they will come directly from NSCCF.

CCB did not respond to requests for further comment by press time. 

CCB Pension will be mainly supervised by China’s banking watchdog, the China Banking Regulatory Commission, but it will also come under the purview of the MHRSS as the China PPF assets supervisor and the China Insurance Regulatory Commission.  

There were Rmb3.5 trillion in AUM in the basic PPF scheme, the first of three pillars in the mainland retirement system, which covered 842 million urban and rural workers and residents as of the end of 2014.

The EA scheme, the second pension pillar launched in 2004, had Rmb860 billion in AUM as of September, run by 20 investment managers, including 12 fund houses, four pension insurance companies, two insurance-backed asset managers and two brokerage firms.