Insto roundup: Khazanah’s foreign asset plans; KIC, NPS seek smaller managers

AUSTRALIA

Vision Super has called on Australian institutional investors to pressure Melbourne-based mining giant BHP to suspend its membership with industry groups whose actions might have undermined the Paris Agreement on climate change.

The $10 billion industry superannuation fund wants its peers to vote for the resolution they have co-filed for BHP’s Australian annual general meeting next week, which already has the support of investors overseeing $12.3 trillion.

Around 22% of BHP's UK-based investors, including the Church of England Pensions Board, voted for the resolution at their London AGM earlier this month. Vision Super said it was hoping to see an even stronger result in Australia, which represents 58% of BHP’s shareholder base.

Source: Investment Magazine

CHINA

The China Securities Regulatory Commission, for the fourth time this year, said that it was considering raising the equity investment limit for domestic insurance firms to 40% from 30%.

The limit includes both private equity and listed stocks. It is estimated that the move would bring Rmb700 billion ($99 billion) to Rmb800 billion into the A-share market.

Source: China Securities Journal

JAPAN

Dai-ichi Life and Meiji Yasuda Life are taking a cautious stance on investment in risk assets such as stocks and foreign bonds that are not currency-hedged, officials from the two companies said on October 24.

Dai-ichi Life, Japan’s second largest private life insurer, plans to reduce its holdings of Japanese stocks in the October-to-March financial half-year. Meiji Yasuda Life, the third biggest, said it would look to increase its holdings of safe assets, including domestic bonds and currency-hedged foreign bonds.

While their investment approaches differ in some details, their stance reflected limited appetite for risk assets amid uncertainties about a US-China trade war and as Japanese share prices have risen to a one-year high despite a sluggish economy.

Source: Reuters

Furthermore, Dai-ichi Life’s stance on foreign bond investments for the October-to-March period depends on currency and interest rate levels, Akifumi Kai, general manager of investment planning, said at a news conference.

Dai-ichi Life plans to keep its domestic bond holdings steady in the six months to the end of March 2020 as the insurer expects their yields remain low. Japan’s second largest private life insurer plans to cut its holdings of domestic stocks with the aim of reducing risk.

Dai-ichi Life also plans to continue adding alternative assets – including hedge funds, private equity and real estate – over the six months through March 31.

Source: Reuters

Sumitomo Life plans to increase investments in risk assets such as stocks and foreign bonds to boost income as global bond yields are expected to stay depressed, its head of investment planning said on October 23.

Japan’s fourth largest private life insurer expects solid US consumption and jobs growth to underpin the US and global economies despite headwinds from a US-China trade war, even though it expects markets to remain volatile.

Source: Reuters

KOREA

Choi Heenam

National Pension Service (NPS) and Korea Investment Corporation (KIC) are seeking small and medium-sized asset managers to chase smaller deals and new strategies for infrastructure. This comes in the face of mounting competition for core and core-plus assets, which make up the majority of their portfolios.

“KIC is considering boosting co-investment with sector-specialised GPs, while focusing on prime infrastructure with downside protection,” chairman and chief executive Choi Heenam at the ASK 2019 Real Estate & Infrastructure Summit in Seoul on October 23.

NPS is looking to add value-add and opportunistic strategies via "mid-market management companies” to its W20 trillion ($17 billion) global infrastructure portfolio.

Source: Korean Investors

Big South Korean institutional investors' interest has cooled in foreign real estate assets sourced by domestic brokerages because of heated competition and inflated prices, said speakers on a panel discussion at the ASK 2019 Real Estate & Infrastructure Summit in Seoul on October 23.

AsianInvestor reported earlier this year on the emergence of the trend for brokerages to source property for asset owners, its risks and how those asset owners' demand for overseas property was starting to wane.

Instead, they are turning  towards blind-pool funds and separately managed accounts. Amid growing economic uncertainty, Korean investors will focus on developed markets and boost debt investments, while diversifying into specialised property assets with little correlation to economic cycles, such as multi-family, senior and student housing.

Source: Korean Investors

The sale of KDB Life Insurance is showing little progress, as Korea Development Bank (KDB), which owns the insurer, is seeking a price of as high as W800 billion for it

Although KDB Life Insurance completed subordinated debt refunding to mitigate the burden, the annual interest burden is still high, which is why even local financial holding companies are hesitating.

Source: Business Korea

MALAYSIA

Shahril Ridza Ridzuan

Malaysian sovereign wealth fund Khazanah plans to quadruple its overseas investments to between 60% and 70% of its total portfolio over the next decade to reduce domestic risks, a parliamentary report said.

Its foreign investment allocation now stand at around 15%, down from 44% five years ago. The decline was partly due to the central bank’s restrictions on foreign capital outflow.

Managing director Shahril Ridza Ridzuan said the fund should have more overseas investments in countries such as Norway and Singapore.

Source: Reuters

Following a probe on Khazanah’s Rm6.3 billion ($1.5 billion) losses in 2018, the Malaysian Parliament’s Pubic Accounts Committee said high investment risk concentrated in a handful of companies has contributed to the decline in returns.

The chairwoman of the committee, Noraini Ahmad, said Khazanah’s previous investment strategy saw between 80% and 85% focused on nine to 10 companies.

She added that government policies in the telecommunications sector, in which Khazanah owned several companies, was among other factors leading to the losses.

Source: The Star

SINGAPORE

State investor Temasek has made a $2.9 billion offer for a majority stake in Singapore-based shipbuilder Keppel Corp – the biggest move by the sovereign investor in the maritime business.

According to people familiar with the matter, Temasek plans to merge Keppel with rival Sembcorp Marine in response to consolidation in the ship construction sector in South Korea and China.

Temasek already owns close to 21% of Keppel, in which BlackRock and Vanguard are also investors. The offer indicates a 26% premium to Keppel’s closing price on October 18, S$5.84 ($4.28), boosting Temasek’s holding of the firm to 51%.

Source: The Wall Street Journal

TAIWAN

Nan Shan Life and Farglory Life are banned by Taiwan's financial regulator from investing further in Formosa bonds as they have reached the upper investment limit.

The Financial Supervisory Commission stipulated that, including Formosa bonds, Taiwanese insurers cannot invest more than 65.25% of their investment funds overseas. Formosa bonds were lumped together with insurers’ overseas investments under new rules introduced in November last year.

Source: ETtoday

INTERNATIONAL (EXCLUDING ASIA)

Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ) is deepening its relationship with India’s Piramal Enterprises by acquiring $250 million in convertible debentures from the financial and industrial group.

The partnership between Piramal and the C$326.7 billion ($250.2 billion) fund began with an initial investment in 2017 and includes a residential real estate co-investment platform.

Source: CDPQ

Half (51%) of insurance firms and a third (37%) of pension funds in Europe plan to increase their allocations to real assets over the next 12 months, and 90% of respondents overall cited ESG as an important factor in such investments, according to a survey by Aviva Investors.

The most popular strategies for pension funds were direct real estate (53%), infrastructure equity (53%) and structured finance (52%). Insurers aim to increase investments in real estate finance (54%) above all, then infrastructure equity (52%) and structured finance (51%).

This is despite multiple concerns about the challenges involved with such strategies, above all ‘financial instability’. This was seen by 49% of insurers and 45% of pension funds as the most likely and concerning event for real asset investment over the next 12 months.

Source: Aviva Investors

Institutional investors globally have increased their target allocations to real estate to 10.5% from 10.4% but remain under-invested in the asset class (with an average 9.4% allocation), according to a survey from Hodes Weill & Associates and the Cornell Baker Program in Real Estate.

Moreover, despite returns of 8.8% from property investments being down from 9.1% the year before, they continue to outpace institutions' target returns, found the 2019 Institutional Real Estate Allocations Monitor. Appetite for the asset class has reached a seven-year high, it noted.

Meanwhile, allocations to third-party managers continued to rise in 2019, noted the report, which polled 212 institutions with $12.3 trillion under management.

Source: Hodes Weill & Associates