Insto roundup: BLF picks managers; Pru eyes higher China JV stake
AUSTRALIA
Australia will begin publishing “heat maps” of the performance of pension funds next year and will pressure those with poor records to exit the industry, the Australian Prudential Regulation Authority (Apra) has said.
Australian pension funds manage A$1.7 trillion ($1.20 trillion) in savings but lack “maturity” in governance and risk management practices, Apra deputy chair Helen Rowell said in a speech published on the regulator’s website.
The sector is under pressure to lift standards and improve accountability following a public inquiry last year which exposed widespread misconduct in the financial industry.
Pension investor APG in partnership with Queensland Investment Corporation has agreed to acquire a 36% interest in Brussels airport.
The APG-QIC jointly led consortium also includes Swiss Life.
Upon completion, APG and QIC will both have a stake of 16.8% in Brussels Airport. Closing of the transaction is expected to take place over the coming months and is subject to approval by the regulator.
Source: QIC
CHINA
China Life, Ping An Property and Casualty, Zhujiang Life and Aeon Life have obtained regulatory approval to issue bonds to replenish their capital, which will strengthen their capital adequacy and solvency indicators.
The four insurers can raise Rmb 35 billion ($5.2 billion), Rmb10 billion, Rmb3.5 billion and Rmb2 billion, respectively, by issuing 10-year callable bonds in the interbank bond market, according to a media report.
Source: finet
The future of Tongyang and ABL, two South Korean insurers owned by China’s Anbang Insurance Group, remains unclear, after Beijing decided to retain control of Anbang for another year.
The Chinese government seized Anbang in February 2018 as part of its industry-wide crackdown on financial risks. This led to former Anbang chairman Wu Xiaohui’s arrest and subsequent conviction for fundraising fraud and embezzlement. He was later sentenced by a Chinese court to 18 years in jail.
Initially, the government said it would take control of Anbang for one year, but the country’s insurance regulator has announced that it will continue to manage the troubled insurer until February 22, 2020.
Following that decision, concerns have grown over the future of Tongyang and ABL’s business activities, as the extension of Anbang’s government ownership may lead to stagnating business for the two insurers amid a downturn in the Korean insurance market.
Source: Insurance Business Magazine
JAPAN
Nippon Life Insurance has expanded its use of currency swaps, dollar-yen options, equity and interest rate derivatives in particular since October to boost income and offset the impact of hedging costs, said Toshinori Kurisu, deputy general manager at the firm’s finance and investment planning department.
The layered approach reflects Nippon Life’s exposure to overseas debt markets, which account for one-fifth of its 65.5 trillion yen ($590 billion) in assets. Of those, almost half are in the US, with 40% in Europe, Kurisu said.
Japan’s life insurers are increasingly becoming creative as global bond yields slide with slowing economic growth. Currency hedging expenses, a pivotal factor for some of the world’s biggest holders of debt, add to that predicament with the costs for dollar protection near the highest since 2008.
Source: Bloomberg
Japan Post Insurance is shifting its approach to sustainable investing by picking companies with a technological edge to solving global problems, its investment chief said, in a move away from typical ESG selection criteria.
With total assets of 74.5 trillion yen ($670 billion), the life insurer is one of Japan’s biggest institutional investors and a major player in the world’s third largest stock market.
The firm plans to triple the portion of environmental, social and governance (ESG) investments in its domestic stock portfolio to around 100 billion yen over the next couple of fiscal years starting in April, chief investment officer Atsushi Tachibana told Reuters.
Source: Reuters
MALAYSIA
Malaysia’s insurance market is expected to remain stable in 2019, according to an industry report released by RAM Ratings.
New business premiums for life insurance are expected to grow between 1% and 2% due to weaker consumer sentiment and concerns over the rising cost of living. In 2018, new business premium growth was up 1.8%, totalling MYR 10.3 billion ($2.52 billion).
The report said new business growth may be hindered in coming years as the industry adapts to new regulations concerning investment-linked insurance.
Source: Insurance Business magazine
NEW ZEALAND
Greenpeace is calling on the New Zealand Super Fund to divest all of its shares in close to 130 oil and gas companies globally, which totaled more than NZD$550 million ($377.8 million).
"New Zealanders' retirement savings shouldn't be bankrolling industries that directly threaten the future they are saving up for,” said Amanda Larsson, climate campaigner for Greenpeace.
Most of NZ Super Fund’s stakes are in companies based in North America. wiith about 22 of those companies from Canada, and 43 from the US.
The NZ Super Fund has reduced its exposure to oil and gas stocks in recent years as it has sold NZD$500 million worth of these stocks since 2016, when it had NZD$745 million invested in them.
James Shaw, co-leader for the Green Party warned that investment funds, including NZ Super Fund, should be investing in renewable energy companies rather than fossil fuel firms.
Source: NZ Herald
THE PHILIPPINES
The Social Security System’s (SSS) president and chief executive officer, Emmanuel Dooc, has resigned, according to a news report.
Local English language online news Rappler quotes Mr. Dooc as saying that he is leaving because the recently-passed Social Security Act 2018 has overhauled the state-run fund’s charter.
"My term of office automatically expires upon effectivity of the new SSS Charter," Dooc said according to the report.
It is unclear who is taking over Dooc’s duties in the interim.
Source: Asia Asset Management
SINGAPORE
GIC is concerned about the "high uncertainty" in the global investment environment, given the increased market valuations and low volatility, especially in developed markets, said its chief executive officer Lim Chow Kiat.
"The potential reward for risk-taking is not particularly favourable," he said in a speech at a forum in Sao Paulo on March 14 to commemorate the Singapore sovereign fund's five years of physical presence in Brazil.
GIC's key concerns are inflation rising faster than expected; China's slowdown being more pronounced than expected; a "flare-up" in geo-political concerns; rising market vulnerabilities due to long periods of low market volatility and untested liquidity of new investment structures.
Source: Straits Times
Ensign InfoSecurity, partly owned by Temasek Holdings, has launched a joint-venture centre that is aimed at protecting critical infrastructure against sophisticated cyberattacks.
The new centre -- a tie-up between Ensign and the US's IronNet Cybersecurity -- comes soon after the two companies launched a research and development joint venture, dubbed Cyber Analytics, on March 14.
Intelligence-sharing on cyberthreats will be a key strategic focus for the new Singapore-based centre, according to a joint statement from Ensign and IronNet.
Source: Business Times; Ensign
SOUTH KOREA
South Korean investors poured a record €7.3 billion ($8.28 billion) into European commercial real estate last year, with volumes rising nearly sixfold over the past five years, according to property services firm Cushman & Wakefield.
The UK accounted for more than 40% of the total, with £2.3 billion ($3.05 billion) going into London property. The investment push has been led by the likes of sovereign wealth fund Korea Investment Corporation and Korean state retirement scheme National Pension Service.
South Korean investors are being lured to prime European real estate by cheap financing, high yields and currency hedging premiums, say property agents. In addition, domestic regulatory changes in 2015 made it easier for Korean institutions to invest abroad. Plus they have seen less competition from Chinese institutions thanks to Beijing’s clampdown on outbound capital.
Source: Financial Times
Samsung Life Insurance is seeking to make inroads into Vietnam through an equity investment in Bao Viet Life, the Southeast Asian country's largest life insurer.
Industry sources said to Korea Times that the firm is in talks with Bao Viet Life, a state-owned insurer, to acquire a stake in the latter. Bao Viet Life is the seventh-largest listed company in Vietnam.
It is also Vietnam's largest life insurer with nearly 200,000 employees and financial planners at its 75 branches across the country. The firm leads the insurance market, with a nearly 19%share, followed by Prudential and AIA.
The life insurer is fully owned Bao Viet Holdings, in which the Vietnamese government owns a 72% stake. Bao Viet Holdings is also a listed firm on the Ho Chi Minh bourse with a market capitalisation of over 3 trillion won ($2.65 billion).
Source: Korea Times
Kyobo Life Insurance chairman Shin Chang-jae has made a peace offering to the insurer's investors to settle a feud ahead of its plan to list its shares on the main bourse in Seoul.
The investors, who have waited for the insurer's initial public offering (IPO) since 2015, announced in November they wanted to exercise a put option after Kyobo decided not to go public last year.
A put option is a stock market device which gives the owner the right to sell an asset, at a specified price, by a predetermined date to a given party, and the investor's decision has imposed a great deal of pressure on Kyobo.
Friction between the investors and company management intensified after local media reported in February that chairman Shin was considering taking legal action against the firm's investors. Shin has since said he is willing to discuss the issue with investors.
Source: Korea Times
Corporate retirement funds posted poor returns in 2018 amid low interest rates, according to market data cited by media reports.
Most of these retirement funds saw yields hover below the 2% mark last year, with the best performer chalking up a return rate of a mere 2.11%.
Market watchers attributed the low returns to the fact that the bulk of these funds are plans that guarantee principal and interest, and, therefore, invest in low-yielding vehicles, such as bank deposits, insurance products and state bonds.
These investment products are linked to interest rates, which are at ultra-low levels. South Korea's benchmark interest rate was 1.5% before the Bank of Korea hiked it by a quarter percentage point in November.
Source: Yonhap News Agency
TAIWAN
The Bureau of Labor Funds (BLF) has appointed five foreign fund managers for its $1.5 billion emerging market equity mandate that will employ multi-factor strategies.
The chosen managers are Amundi, DWS, Nomura, Robeco and State Street Global Advisors.
Each manager will be given $300 million for the five-year mandate and they have to earn a return that is 50 basis points more than the annual net return of the custom-made iEdge Rayliant EM Dynamic Multi-Factor Index.
Source: BLF
INTERNATIONAL (EXCLUDING ASIA)
Prudential would like to increase its stake in its 50/50 insurance joint venture with Chinese financial services group Citic, said the UK insurer’s chief executive, as it reported above-forecast profit growth driven by its Asian operations.
“If [Citic] were willing to sell, we’d be a willing buyer,” said Prudential CEO Mike Wells. Beijing has relaxed its rules on ownership, allowing foreign insurers to buy up to 51% of their joint ventures in the country.
Prudential’s Asian business posted a 14% rise in operating profit in 2018, helping contribute to an above-forecast 6% rise in overall operating profit to £4.8 billion.
Source: International Investment
The number of conversations still dwarfs the number of RFPs being issued, but the quantum leap in the ranks of asset owners reviewing their China options points to a likely pickup in A-share mandates, investment consultants predict. For instance, UK fund Coal Pensions Trustees is about to make its first dedicated A-share allocation, as reported by AsianInvestor.
Analysts say index provider MSCI’s recent decision to increase the weight of A-shares to 3.3% of its emerging markets benchmark by November from 0.7% should prompt net inflows from overseas investors of between $65 billion and $85 billion in 2019.
Source: Pensions & Investments