Insto roundup: NPS to actively manage FX risk; Adia culls Japan equity team

The UN-convened Net-Zero Asset Owner Alliance has called for the cancellation of all new thermal coal projects, a phase-out of all unabated coal-fired electricity generation and a cessation of the development of further thermal coal power plants.

In its Thermal Coal Position, published on November 6, the 30-strong Alliance says it will primarily aim to support portfolio companies in adopting transition plans in line with members’ position through engagement. Members can employ an escalation strategy that may over time result in divestment if a company remains unresponsive to its demands.

Members include some Asia-based asset owners, such as Australian insurer QBE, China’s Ping An Insurance, Hong Kong-based Peak Reinsurance, Singaporean insurer Great Eastern Holdings, Korea’s Shinhan Life Insurance and Sompo Japan Insurance.

Source: United Nations Environment Programme Finance Initiative

AUSTRALIA

The drive by Australian superannuation funds to invest in exchange-traded funds (ETFs) is constraining those smaller companies that sit outside of stock indices.

According to Stoic Venture Capital, there had been a drive recently towards ETFs by superannuation funds which were looking for easier and cheaper ways to invest.

Given the broad reach of ETFs, this was giving super fund members exposure to areas such as US technology and other high-growth opportunities. However, it was also potentially pulling investment capital away from smaller Australian companies.

Source: Money Management

CHINA

Ping An Overseas has appointed State Street as custody and fund administration services provider for two private equity funds: Ping An Global Equity Selection Fund and the Ping An Global Equity Fund. 

The Ping An Global Selection Fund operates a fund of funds programme that invests into a well-diversified portfolio of top-tier buyout managers in North America and Europe. The Ping An Global Equity Fund is set up to capture the co-investment opportunities sourced from the group's extensive network of global general partner relationships.

Source: State Street

HONG KONG

The Hong Kong Monetary Authority (HKMA) is teaming up with the International Finance Corporation to help commercial banks address climate change.

It is seeking to cement the city’s place as a hub for green financing as $29 trillion in green and climate investment opportunities are expected globally over the next decade.

About $18 trillion in green and climate-related financing opportunities are expected to emerge in Asia in the next decade, said HKMA senior executive Edmond Lau.

Source: South China Morning Post

Despite heavily marketing itself as a health-focused brand, Hong Kong-based insurance firm AIA still invests in coal, even as a rising number of its peers have divested from such assets.

Research by a Hong Kong-based analyst found that AIA has likely invested about $6 billion in the coal industry, the single biggest source of carbon emissions. The insurer’s holdings include Malaysia’s Tenaga Nasional, a utility that relies mostly on coal for its power plants.

In line with its commitment to fighting climate change, AIA has joined the Climate Action 100+ investors initiative. Among the 20 insurers that have joined this initiative, however, only AIA and two small local insurers are still investing in coal.

Source: Asia Times

JAPAN

Government Pension Investment Fund (GPIF) has recorded an return of 3.05% on its ¥167.53 trillion ($1.59 trillion) portfolio in the quarter to September 30.

The largest retirement fund in the world has allocated 26.61% and 23.46% to domestic and foreign bonds, respectively, and 24.06% and 25.88% to domestic and foreign equities, respectively. Alternative investments account for just 0.6%, though it is allowed to invest as much as 5% of its portfolio in that asset class.

Source: GPIF

Dai-ichi Life's capital adequacy is susceptible to interest rate and stock market volatility due to the duration mismatch between assets and liabilities as well as a high exposure to domestic equities in its investment portfolio, according to Fitch.

Still, the rating agency says the insurer says the insurer has a "most favourable" business profile, very strong capitalisation and very strong profitability, all of which should help it withstand stress, including financial market turmoil caused by the coronavirus,

Source: Fitch

KOREA

The National Pension Service (NPS) will more actively manage the currency composition of its overseas assets to respond more flexibly to exchange rate fluctuations from its rising foreign investments, it decided in its ninth fund management committee meeting held on October 30.

“Examples of the tighter management can include an increase in safe currencies such as the US dollar and the Swiss franc in the event of financial market instability and a decrease in volatile currencies in the case of temporary events such as Brexit,” the NPS explained.

NPS said in July that it would seek to invest 55% of its assets into overseas assets by 2025, up from its current target of 50% by 2024.

Source: Business Korea

MIDDLE EAST

Abu Dhabi Investment Authority (Adia) has shut down its Japanese equity team, with three portfolio managers departing, according to people familiar with the matter. The sovereign wealth fund has also seen its acting head of Asia Pacific real estate Anthony Bertoldi and head of European real estate Pascal Duhamel depart, both for personal reasons.

Adia will continue to invest in Japanese equities but only through its external managers and as part of a passive portfolio, the people said. A spokesperson confirmed the fund had changed its approach to investing in Japanese equities but declined to comment further.

Sovereign wealth funds in the Gulf, where governments are struggling to absorb the impact of lower oil prices, have been making adjustments to generate higher yields. Adia’s most recent report showed its 20-year annualised returns were 5.4% in 2018, the lowest since it began reporting them in 2008.

Source: Bloomberg

Abu Dhabi sovereign wealth fund Mubadala has led a $700 million round of growth equity investment into US real estate and technology firm Reef to transform under-used urban spaces, such as car parks, into hubs for restaurants and other services.

Investing alongside Mubadala are Japan’s SoftBank, US private investment firm Oaktree, Switzerland’s UBS Asset Management and German venture capital manager Target Global.

Oaktree and Reef have also launched a $300 million infrastructure partnership with Reef, which is the US's biggest operator of mobility, logistics hubs and neighbourhood kitchens.

Source: Reef

SINGAPORE

Temasek Foundation has invested in the effort to develop a Covid-19 vaccine, said Temasek International chief executive Dilhan Pillay on November 3.

He said this in response to a question on Temasek's role in helping to procure and distribute the vaccine, during a discussion at the Temasek Trust Conversation. Temasek Trust is the philanthropic arm of Singapore investment firm Temasek.

Source: Straits Times

TAIWAN

The Public Service Pension Fund’s (PSPF) investment income plunged 87.56% year-on-year in the nine months to September, dragged down by the coronavirus crisis and a strong local dollar.

PSPF eked out an investment gain of 0.94% or NT$5.51 billion ($192.8 million) in January through September, sharply down from NT$44.3 billion in the same period last year, according to the the fund statement on November 5.

A little over half (54%), or NT$325.1 billion, of PSPF’s investable assets are managed internally. Investment gain from these assets fell to NT$7.42 billion this year from NT$13.03 billion in the January to September period of 2019.

Source: Public Service Pension Fund