Insto roundup: Meagre NPS returns, Kwap CIO to exit

ASIA

Asian institutions are lagging well behind their international peers when it comes to implementing sustainable investing, according to Schroders’ Institutional Investor Study 2018 on this topic.

Only a third of respondents in Asia said they had increased their sustainable investments in the past five years and 17% had reduced them, compared to the global figures of 47% and 7%, respectively. That said, 68% of institutions in Asia – and 74% globally – expect the role of sustainable investing to become more important over the next five years.

Source: Schroders

AUSTRALIA

The Royal Commission inquiry began its focus on the country’s insurance industry on September 10 with the admission that Clearview Wealth, the former life insurance arm of NRMA, committed over 300,000 criminal breaches when cold-calling customers between 2014 and 2017.

The commission has conducted a wide-ranging investigation of unethical or illegal activities across financial services, and has the power to recommend prosecutions and begin reforms. Clearview’s actuary and risk officer Greg Martin, said the company closed one of its divisions after the Australian Securities and Investments Commission accused it of breaking “anti-hawking” laws on every sales call it made from 2014 to 2017.

All-told, the royal commission has received notice of various potential rules breaches by 16 domestic and foreign insurance companies, including Hong Kong’s AIA and Switzerland’s Zurich.

Source: Reuters

CHINA

Foreign investors have been pouring into China A-shares this year in record amounts via the Stock Connect, while mainland money flow into Hong Kong equities through the link has stuttered or even reversed.

These trends highlight the two segments’ contrasting investment approaches. Chinese investors have responded to the Hang Seng index’s 19% drop between late January and early September by cutting their losses, in a relatively immature response. Foreign institutions, meanwhile, have been adding to their allocations at more attractive levels, with the CSI 300 having shed a quarter of its value over the same period.

Source: Financial Times

Stricter regulations and lower yields on alternative investments are leading Chinese life insurers to trim such exposure and shift into mainstream assets, according to Moody’s Investors Service.

Allocations to alternatives, including debt investment schemes, fell from a peak of 40.2% in December to 39.4% in May, said Qian Zhu, senior credit officer at the rating agency at a press conference in Hong Kong on September 7.

Meanwhile, Chinese lifers are raising their exposure to more traditional assets, such as deposits and government bonds, making their risk exposure more healthy, added Zhu.

The Indian insurance industry is expected to grow to $280 billion by 2019-2020, industry body Assocham said, citing a joint study conducted with research firm APAS.

Assocham said the study showed insurance penetration in the country reached 3.7% in 2017, from 2.71% in 2001, and that gross premiums had increased from Rs 3.2 lakh crore ($49 billion) in 2011-12 to Rs5 lakh crore ($72 billion) in 2017-18.

Source: OutlookIndia

Singapore’s Temasek is set to invest up to $400 million in the National Investment and Infrastructure Fund (NIIF), set up by the government of India to boost infrastructure financing in the country.

Temasek joins the government of India, Abu Dhabi Investment Authority (ADIA), HDFC Group, ICICI Bank Ltd, Kotak Mahindra Life Insurance and Axis Bank Ltd as investors in NIIF’s Master Fund.

Apart from the master fund, NIIF also operates a fund of funds, through which it has invested £120 million ($155 million) in the Green Growth Equity Fund (GGEF), via a partnership with the UK government and aimed at investing in renewable energy and other green businesses.

Source: Livemint

JAPAN

Prime Minister Shinzo Abe said he would raise the retirement age in Japan beyond 65, and allow people to defer collecting their pensions to beyond 70 in return for higher payments, in an attempt to reduce the costs of the long-lived nation’s retirees.

In part of his pre-election pitch, Abe said having people in the workforce for longer would help bolster economic growth and save money, and he said he aimed to “overhaul” the social security system over the next three years. Japan is set to hold a general election on September 20, which Abe’s Liberal Democratic Party is widely expected to win in a comfortable majority.

Abe’s comments reflect the rapid aging of Japan’s society; the country’s native population is falling by 300,000 a year. However, Abe’s aim to raise older workforce participation has been a success, with 23.5% of the labour force now aged over 65, up from 19.9%.

Source: Nikkei, Financial Times

Dai-ichi Life said it would buy Sun Life of Australia for A$460 million ($327.68 million), in the latest overseas acquisition by a Japan life insurer seeking to diversify from a shrinking home market.

In a statement, Dai-ichi said it intended to close the deal between December and February 2019, while a 20 year agreement is being finalised for Dai-ichi to sell life insurance products through the distribution network of Suncorp Group, current parent of Sun Life.

Source: Japan Times

KOREA

The National Pension Service (NPS) delivered a return of just 0.9% during the first six months of 2018, well below that of similar state pension peers such as those in Canada and Australia, according to a report from Hana Financial Investment Co., a local brokerage.

California Public Employees’ Retirement System reported a 2.2% return, while the Canada Pension Plan Investment Board enjoyed a 6.6% investment return in the first six months of 2018. Kim Hoon-gil, who authored the report, blamed NPS’s poor first half performance on its investment focus on bonds as opposed to equities, noting it continued to focus on local and foreign bonds.

Source: Yonhap News Agency

NPS and the Public Officials Benefit Association (Poba) are teaming up to form a W350 billion ($314 million) blind-pool fund to invest into the country’s logistics centres. The fund will receive W200 billion from NPS and W150 billion from Poba, sources with knowledge of the matter said.

The size of the fund indicates that it could invest into about 10 logistics facilities, assuming its ability to add leverage allows it to have around W700 billion in capital. Yields from logistics funds tend to be about 7% to 9% per annum, above the average 5% investment returns typically targeted by South Korean pension funds. NPS and Poba have appointed ADF Asset Management, a Korean logistics-focused investment firm, to manage the fund.

Source: Korean Investors

Korea Post sought out the advice of Goldman Sachs on cryptocurrencies, with staff from the $112 billion fund set to meet members of the US investment bank’s crypto research team in Hong Kong to learn more about the quasi-currency asset class.

Kang Seong-ju, president of Korea Post, told Bloomberg in an interview he asked Goldman’s incoming chief executive David Solomon at a recent New York meeting “to pass on their know-how in the cryptocurrency area”, noting that since some people felt they had potential, his organisation needed to learn about their strengths and weaknesses. Kang said Korea Post had no immediate plans to invest into cryptocurrencies.

Source: Bloomberg

MALAYSIA

Civil service pension fund Kwap has confirmed that its chief investment officer and deputy chief executive, Nik Amlizan Mohamed, will take up a new role as CEO at Lembaga Tabung Angkatan Tentera (LTAT), or the Armed Forces Fund Board, Kwap told AsianInvestor in a statement.

Kwap will announce Nik Amlizan’s replacement in the role of CIO after a meeting of its board of directors, but did not provide a date. It is not known when Nik will take over as LTAT CEO officially. AsianInvestor was unable to reach a LTAT representative.

Nik replaces Lodin Wok Kamarudin, who was once chairman of 1MDB, the troubled state fund alleged to have squandered billions of ringgit through various misdeeds. Lodin resigned on August 30.

Source: Kwap; Free Malaysia Today

PHILIPPINES

State pension fund Government Service Insurance System (GSIS) is likely to include newly-hired uniformed personnel under its social security coverage through the creation of a new fund, according to a local media report.

GSIS president and general manager Jesus Clint Aranas said that under a proposed bill, new entrants who received their initial appointments will be accepted to the Military and Uniformed Personnel (MUP) Insurance Fund.

“GSIS will manage the MUP Insurance Fund separately and independently from the Social Insurance Fund and other funds it administers. It will be contributory in nature and prospective in application,” Aranas said.

Source: Philippine News Agency

TAIWAN

Taiwan’s Bureau of Labor Funds has proposed to increase the overseas investment cap for two of the country's public pensions to 60% from 50%. The Labor Insurance Fund and National Pension Fund currently hold 48% and 47%, respectively in offshore assets. 

A BLF spokeswoman told AsianInvestor that it was making the proposal because overseas investment yield has been relatively high. The plan will need approval from the Ministry of Labor and Ministry of Health and Welfare. It is not certain when the ministries will make their decisions.

Source: Bureau of Labor Funds

INTERNATIONAL (EX-ASIA)

Influential asset owners, including California Public Employees’ Retirement System (Calpers) and Harvard University’s $37 billion endowment fund, are ditching timberland investments, and fundraising for the sector is well down, amid poor performance, reports Pensions & Investments.

Calpers in the third quarter sold most of its $2 billion timberland portfolio at a loss, with few plans of investing again; instead, the $359 billion scheme will focus on core real estate. Harvard Management is reportedly trying to sell stakes in a $700 million portfolio of timberland in South America.

Moreover, two timberland funds have raised a combined $600 million so far in 2018, after seven raised $1.4 billion in 2017 and eight raised $3.1 billion in 2008, according to alternative investment research firm Preqin. 

Source: Pensions & Investments