Insto roundup: NPS to ramp up staff, overseas investing; CIC’s talent outflow
ASIA
The chief executive of the Hong Kong Insurance Authority, Clement Cheung, has been re-elected for a second term as chairman of the Asian Forum of Insurance Regulators (AFIR) for two years until 2022.
He was re-elected at the 15th Annual Meeting of AFIR on July 14. Seven of AFIR’s 17 member jurisdictions shared experience in coping with Covid-19 during the proceedings.
Cheung said: “Apart from posing a major challenge to insurers and the global investment market, the Covid-19 pandemic also demonstrated clearly the imperative to step up our efforts in strengthening mutual support and reinforcement.”
Source: Asia Insurance Review
AUSTRALIA
AustralianSuper has partnered with the country's major greenhouse gas emitters in a new initiative which will see them work towards a decarbonised future.
Australia’s largest superannuation fund, joined by National Australian Bank and Schneider Electric, has partnered with BHP, Woodside, BlueScope Steel, BP Australia, Orica, APA Group, Australian Gas Infrastructure Group and Wesfarmers Chemicals, Energy and Fertilisers as a signatory of the Australian Industry Energy Transitions Initiative. Independent charitable organisations ClimateWorks Australia and Climate-KIC Australia, in collaboration with the Energy Transitions Commission, are conveners of the initiative.
The initiative will focus on opportunities across supply chains for commodities including steel, aluminum, liquified natural gas and chemicals. These supply chains together contribute to more than a quarter of Australia's annual greenhouse gas emissions and generate around A$160 billion in exports.
Source: Financial Standard
Four in five (79%) insurance executives in Australia think their industry’s investment performance will be directly hit by Covid-19 in the next 12 months, found a report by law firm Clyde & Co.
Moreover, 63% believe there will be greater legal and regulatory oversight of the industry as a result of the pandemic, and about half (52%) are worried about the likely impact of Covid-19 on their employees.
Clyde & Co had asked its senior clients at local and international insurers and intermediaries about their top coronavirus-related concerns and how they saw the pandemic affecting their business in the next 12 months.
Source: Asia Insurance Review
CHINA
China Investment Corporation is losing senior-level talent at a very bad time, with former and current executives at the sovereign wealth fund pointing to shrinking opportunities, sliding compensation competitiveness and rising restrictions.
Three of CIC’s top executives have resigned since April, adding to a steady exodus in recent years that has included at least 17 team heads and managing directors.
The departures have now become significant enough that they threaten to hurt the fund’s returns, said Li Jie, head of the foreign reserves research center at Beijing’s Central University of Finance and Economics. “There’s no doubt that CIC’s appeal to talent in the market has been declining,” Li added.
Source: Bloomberg
The China Banking and Insurance Regulatory Commission (CBIRC) has issued a request for comment on the solvency management of insurance companies.
The request highlights the use of core solvency ratio and comprehensive risk assessment on top of existing comprehensive solvency ratio to improve the monitoring and evaluation of insurers’ solvency management. This is a more comprehensive and dynamic approach and is aligned with the spirit enshrined in the country's China Risk Oriented Solvency System (C-Ross) capital rules, according to Moody’s.
Source: CBIRC, Moody’s
China Three Gorges has approached sovereign funds, including Singapore’s GIC and China Investment Corporation, about potentially acquiring a minority interest representing between 10% and 20% of its own international assets.
The state-owned power giant is exploring selling a stake worth as much as $4 billion in its overseas asset portfolio.
Source: Bloomberg
JAPAN
The Government Pension Investment Fund had billions of dollars in short-term US Treasury debt when the pandemic hit early this year, leaving it with a pile of money to reinvest as the global recession dragged on.
GPIF, as the world’s biggest pension fund is known, boosted its Treasuries holdings to almost 50% of its foreign bond portfolio in the year through March 31, with almost 40% of that amount concentrated in maturities of three years or less, a surprisingly high number for an institution that has to match long-term liabilities.
With the release of such data not due again until next year, it’s difficult to know how GPIF changed its portfolio over recent months. But just as the fund was ahead of the massive influx of investors into money-market funds and short-term debt as the pandemic unfolded, it could also lead the way out.
Source: Bloomberg
KOREA
The National Pension Service (NPS) said on Friday (July 31) it will expand its overseas investment proportion from a target of 50% in 2024 to 55% by 2025.
The NPS’s decision-making investment management committee met under the chairmanship of health minister Park Neung-hoo to discuss the W725.8 trillion ($607.72 billion) pension fund's mid-term overseas investment blueprint. “As a long-term investor, NPS should establish effective investment strategies to cope with the pandemic-caused uncertainties in financial markets here and abroad,” said Park.
Under the plan, NPS's reserves will hit W1 quadrillion ($840 billion) by 2024, while its ratio of overseas holdings will climb above W500 trillion. As part of this, Park said NPS would "expand overseas investment with various opportunities and high performance for stable management of the fund and finances".
Source: The Investor, Pulse News, Reuters
NPS also said it plans to carry out about a fivefold increase in overseas staffing by 2024 which will help to reduce external management fees by nearly W700 billion ($588 million), according to a source familiar with South Korea’s W725 trillion pension fund on July 31.
NPS plans to add 200 more employees to the existing 149 employees that cover overseas investments over the next four years. Among the 200 additions, 160 employees will be based outside of Korea and 40 employees will be based in Jeonju, Korea at NPS's headquarters.
Employees will be selected internally as well as from the domestic and overseas investment industry.
Source: Korean Investors
Silence over the tenure of incumbent chief investment officer (CIO) at the NPS is stirring up talk within the global asset management community. The title is currently held by Ahn Hyo-joon, whose two-year term is set to end on October 8. Under the National Pension Act and internal guidelines, a CIO can serve a two-year term and consecutively serve another year based on his or her performance.
With about two months remaining, the NPS and its overseer, the Ministry of Health and Welfare, have not determined whether to extend Ahn’s term or to search for the next CIO, according to industry sources. The NPS generally takes at least three months to appoint a new official.
The investment industry is closely watching the situation given that NPS already lacks a chief executive. Kim Sung-joo, the former CEO, left the pension fund earlier in January to run for a seat in the National Assembly. This could be one of the reasons for the hiccup in the process since the CEO is in charge of appointing the CIO.
Source: Korean Investors
INDIA
As part of the government's Atma Nirbhar Bharat package, in May, finance minister Nirmala Sitharaman announced that the combined monthly contribution of employers and employees to the Employees' Provident Fund (EPF) was to be reduced from 24% to 20% for May, June and July 2020.
Since the reduced contribution amount was for three months untill July, from August onwards the EPF contribution will get deducted at 24% again (12% each by the employee and the employer).
Source: Economic Times
INDONESIA
The Ministry of State-Owned Enterprises appointed politician Fary Djemy Francis from the Great Indonesia Movement Party (Gerindra) as president commissioner at insurance company PT Asabri.
The appointment of the commissioners is carried out at the general meeting of shareholders on July 29.
Source: CNBC Indonesia
MALAYSIA
Khazanah Nasional has exited its investment in Aemulus Holdings by disposing of its remaining 29.3 million shares or 5.33% stake in the semiconductor testing firm.
According to a Bursa Malaysia filing, Khazanah sold the 5.33% stake, held via its unit Bombalai Hill Ventures, on July 24. According to bourse disclosures, the sovereign wealth fund first acquired a 15% stake in Aemulus in September 2015.
Source: The Edge Markets
SINGAPORE
Singapore sovereign wealth fund GIC posted its lowest rate of return since the 2008 global financial crisis in the last financial year, as it warned of a challenging global economic outlook amid the Covid-19 pandemic.
For the year ended March 31, GIC’s 20-year annualised real rate of return came in at 2.7%, down from 3.4% in the previous financial year, according to its annual report released on July 28.
“Coming into this year we already had concerns about high valuation, indebtedness, policy room and geopolitics,” said Lim Chow Kiat, chief executive of GIC. “Covid just made every one of them worse and more uncertain.”
Source: Financial Times; Channel News Asia
Temasek has not yet decided whether to invoke a material adverse change (MAC) clause in its $4.1 billion conditional offer for Keppel Corp, adviser Morgan Stanley said on August 1.
Keppel fell to a $697.6 million second-quarter net loss last Thursday, breaching a threshold in state investor Temasek's offer to buy control of the company.
"At this stage, the offeror has not made a decision whether to invoke the MAC pre-condition based on the 2Q2020 results," Morgan Stanley said in a regulatory filing issued on behalf of Temasek.
Source: The Straits Times
Pacific International Lines is getting $110 million in funding from an affiliate of Singapore state investor Temasek that will keep the debt-ridden container ship operator in business while talks continue to secure a bigger lifeline of $450 million.
PIL won the investment from Temasek unit Heliconia Capital Management, which has emerged as a white knight in a restructuring package that will freeze loan payments to the carrier’s top dozen lenders until the end of the year.
Source: The Wall Street Journal
Great Eastern posted a net profit of S$297.5 million ($216.3 million) for the second quarter ended June 30, 76% higher than the S$169 million a year ago.
This was due to higher operating profit and the higher valuation of investments as a result of improved financial market conditions during the quarter, the insurance arm of OCBC Bank said in a regulatory update.
Operating profit net of tax from the insurance business rose 16% to S$185.7 million from S$159.4 million a year earlier. Meanwhile, non-operating profit came in at S$35 million, reversing from a loss of S$23.7 million.
Source: Business Times
Allianz has appointed Jon-Paul Jones as chief operating officer for Asia Pacific, effective August 31. He joined Allianz from AIG, where he spent 15 years, most recently as global chief information officer for AIG Operations, based in Singapore.
Based in Allianz’s regional head office in Singapore, Jones will report to Asia Pacific chief executive Solmaz Altin and serve as a member of the company’s regional executive board, a statement from the global insurer said.
In his new position, Jones will be responsible for regional information technology and security, including profit-and-loss oversight of Allianz Digital Services. He will also have functional oversight of all local market COOs and chief information officers in Asia Pacific.
Source: Insurance Business
TAIWAN
The Financial Supervisory Commission (FSC) has released an implementation schedule for an enhanced solvency regime for local insurers over the next six years that will likely increase the capital life insurers are required to hold.
Under the new regime, insurance firms will have to calculate insurance reserves using market interest rates as discount rates instead of the high historical lock-in rates under current practice, according to Moody’s.
Insurers are required to calculate the new solvency ratios on a trial basis in the first phrase (2020-2021). Testing will be carried out in the next phrase (2022-2024). The institutions then have to review its relevant operations in the last phrase (2025). The new regime will be implemented in 2026, in line with accounting framework IFRS 17.
Source: FSC, Moody’s
INTERNATIONAL
Canada's CDPQ has promoted Anita George to deputy head of CDPQ Global, a newly integrated international structure, as the public pension fund pursues its globalisation strategy.
Mumbai-based George was previously executive vice‑president for strategic partnerships in growth markets and is CPDQ’s most senior executive in Asia. Her expanded mandate will now cover all geographies outside Canada.
She will report to Marc-André Blanchard, who will join on September 8 as head of CDPQ Global. He will have direct responsibility for CDPQ’s three main regional hubs outside of Canada: the US and Latin America; Europe; and Asia Pacific. Blanchard was most recently Canada's ambassador and permanent representative to the United Nations.
Source: CDPQ
With governments being forced to provide support to pandemic-hit corporates, state pensions and sovereign wealth funds are worried they will be tapped for the same purpose, despite their being intended to benefit future retirees or generations to come.
Institutional investors are already having to bear the consequences of fiscal and monetary interventions, which have pushed government bond prices to record highs, forcing adjustments in their investment policies as they search for yield elsewhere.
In this context, rising attention from policymakers on state investment funds is an unwanted distraction. It might even be distorting their asset allocation, if it means they invest in more short-term, liquid investments such as government bonds – which yield virtually nothing – because they think they might have to free up cash quickly.
Source: Financial Times
Gold’s surge to an all-time high is winning over a wider fan base of pension funds, insurance companies and private wealth specialists. Managers who run long-term portfolios worth trillions of dollars are taking interest in gold as they search for returns in a yield-starved investing landscape.
The broader array of buyers is one of the key dynamics behind the rally to $2,000 an ounce, even as gold’s traditional customers in India and China remain on the sidelines.
The total value of investor positions in gold futures and exchange-traded funds is equivalent to just 0.6% of the $40 trillion in global funds, but that share could easily double without the allocation looking extreme, according to UBS strategist Joni Teves.
Source: Economic Times