Taiwan’s PSPF to issue landmark total-return mandates

Taiwan’s Public Service Pension Fund (PSPF) has invited fund managers to bid for four global total-return fixed-income mandates totalling $800 million by November 17. The four $200 million mandates were detailed in an announcement today (October 23).

These will be the first global total-return investments made by the NT$563.2 billion ($18.68 billion) fund and the first overseas mandates it has issued since the global multi-asset portfolios it handed out in October last year.

Another Taiwanese state pension manager, the $126 billion Bureau of Labor Funds (BLF), also issued its first global absolute-return bond portfolios totaling $3.6 billion in December last year. BLF is also planning a new type of overseas investment—an absolute-return equity mandate—which it will issue next month, the institution told AsianInvestor.

Mandate details

PSPF's new total-return mandates target US dollar 3-month T-bill yield plus 2.5%, net of all fees and taxes, and standard deviation should not be higher than 6% per annum. The new portfolios will have five-year terms. PSPF will conduct quarterly reviews starting a year after the mandates are awarded.

Asset managers will be able to invest in central government bonds, corporate bonds (including convertible bonds), debentures issued by banks, asset securitisation products, beneficiary certificates (including ETF), derivative financial products for hedging purposes or investment enhancement, and other items to be added by PSPF upon 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.

Financial groups may only have one asset management firm bidding for the mandates. Applicants must have been around for three years and must be managing at least $5 billion in assets as of end-June. Also, a manager will only qualify if their existing multi fixed-income portfolios achieved over US dollar 3-month T-bill yield plus 2.5% aggregate annual returns for the past three years as of June 30.

Applicants must either have an existing operational foothold in Taiwan or be able to appoint domestic financial institutions to act on their behalf. In either case, they must have at least three staff in their client service teams.

The deadline for applications is 5pm on November 17. Application forms and further details can be found on PSPF’s website.

PSPF portfolio breakdown

As of August 31, PSPF outsourced 37.12% of its NT$563.2 billion to external managers (11.06% for domestic portfolios, 26.06% for global). For assets managed in-house, 16.01% of overall AUM was in equity, index funds and beneficiary certificates and 17.15% in fixed income, with the remaining 29.72% in bank deposits, treasury bills and commercial paper.

Overall, PSPF uses the following managers for foreign mandates: AllianceBernstein, Allianz Global Investors, Amundi, BlackRock, Cohen & Steers, Deutsche AM, Fidelity, Invesco, JP Morgan Asset Management, Schroders, UBS AM and Vontobel. 

The mandate types are global equity, Asia Pacific equity, emerging-market equity, corporate bond, high-dividend equity, low-volatility equity, infrastructure, real estate and multi asset.

The last domestic equity mandate PSPS issued was a $930 million equity portfolio in July last year. Since then the fund has handed out no new domestic mandates.