Insto roundup: NPS’s active stewardship; Japan insurers’ property push
AUSTRALIA
The City of Brisbane Investment Corporation (CBIC), which invests on behalf of the Brisbane City Council, will sell a A$35 million ($24.9 million) office building to scale down its exposure to the local commercial property market.
The fund intends to sell its Southern Regional Business Centre in Yeerongpilly, an A-Grade commercial office building built in 2012, which is leased back to the council. Gary Coleman, chief executive officer of CBIC, said recently that the fund was “rebalancing” its assets to be less concentrated in the city.
Nine out of the fund’s 10 property assets are in Brisbane while only one is located outside of Queensland in New South Wales, Australia.
Source: Australia Financial Review
The Australian Labor Party vowed to crack down on the pay of executives in the superannuation industry if the party wins the upcoming election.
“I think all Australians would be concerned by any executive managing their superannuation being paid bonuses worth millions of dollars," said a spokeswoman at the Labor party for financial services.
The party’s move came amid the revelation of an A$36 million bonus allegedly in line for Frederic Michel-Verdier, executive director of IFM Investors, a financial services provider owned by 20 industry superannuation funds, which manages more than A$100 billion of assets. IFM Investors disputed the figure as “highly speculative” and “wildly accurate” but it did not provide the exact amount.
Source: Brisbane Times
CHINA
Lian Life, Pramerica Fosun and Union Life on April 1 obtained approvals from the China Banking and Insurance Regulatory Commission to roll out tax-deferred pension insurance products in the country, which will help to develop the third pillar in its pension system.
This is the fifth batch of insurance firms that obtain such approvals. Previously, a total of 16 insurers, including local big names such as China Life and Ping An Annuity Insurance, and joint venture insurers like Citic Prudential, have got the green light from the regulator.
Source: Shanghai Securities News
HONG KONG
The Mandatory Provident Fund Schemes Authority (MPFA) started a request for information exercise for its eMPF centralised platform on March 28. The platform is meant to automate the MPF scheme administration process and thus brings downs fees.
Interested parties can provide the information no later than April 18. MPFA will then proceed to have the request for proposal exercise and contemplate amendments to the legislation for the platform. The working group on eMPF previously said it planned to launch eMPF in 2022.
Source: MPFA
JAPAN
Japanese life insurance companies' real estate portfolios are set to grow for the first time in four years despite concerns of an overheating property market, spurred by a need for higher yields. The rebound, which comes amid robust demand for office buildings, marks the latest sign of the once-acquisitive industry's return to real estate investment.
With the Bank of Japan's easy-money policy crushing returns on bonds, their mainstay investment, insurers have little choice but to wade back in. A total of 41 life insurers had an aggregate ¥6.1 trillion ($55.2 billion) in real estate assets under management at the end of January, up 0.3% on the year, data from the Life Insurance Association of Japan shows.
Source: Nikkei Asian Review
Dai-ichi Life is backing cleantech investor Energy & Environment Investment (EEI), which is raising its fourth fund to invest in tech startups in renewable energy, electric vehicles and energy storage. Japan-based EEI said its fund would “contribute to the reduction of CO2 emissions” and to the Sustainable Development Goals, “while aiming to maximize our investment returns,” DealStreetAsia reports.
Dai-ichi Life’s investment represents an expansion of Dai-ichi Life’s impact investing strategy, which it launched in 2017. The ¥36.3 trillion life insurance firm has previously focused on direct investing, namely in health and medtech companies like Molecure, and financial services startups.
Source: ImpactAlpha, Deal Street Asia
MALAYSIA
The Employees Provident Fund’s (EPF) share of outsourced investment assets fell to 14.1% last year from 14.77% in 2017 as capital flow to external managers dampened its growth. Malaysia’s largest pension fund said it has set up a new department to monitor the performance of external fund managers, gain “greater clarity” about their activities, and tap into their skills.
EPF outsourced MYR117.56 billion ($28.85 billion) to external managers in 2018, a 2.62% increase from the previous year, the EPF said in a statement in late March. The amount outsourced in 2017 was 17.7% higher than in 2016 and was invested in unspecified volumes of stocks and bonds.
EPF Chairman Samsudin Osman said the fund will continue outsourcing part of its funds to external managers in order to diversify and better manage its performance. The pension fund had MYR833.76 billion of assets under management at the end of 2018.
Source: Asia Asset Management
NEW ZEALAND
A New Zealand Superannuation Fund-led investor group has demanded tech giants, including Facebook, Twitter and Google to shoulder responsibilities for the live-streaming and spread of the Christchurch terror attacks that took place on March 15.
The group, including National Provident Fund and Kiwi Wealth, have called on local and global institutional investors to add pressure on technology companies to tighten their content filters on their platforms.
“We have been profoundly shocked and outraged by the Christchurch terror attacks and their transmission on social media,” said Matt Whineray, New Zealand Super Fund’s chief executive officer.
Source: Chief Investment Officer
SINGAPORE
Sovereign wealth fund GIC acquired a 25% stake in CitizenM, a Dutch real estate developer and hotel operator, in a deal that it says gives the latter an enterprise value of €2 billion ($2.26 billion). GIC did not disclose the price tag for the shareholding.
Lee Kok Sun, chief investment officer of GIC Real Estate, describes CitizenM as an "attractive value proposition of affordable luxury in urban markets". This is GIC's first hotel-related investment thus far in 2019. Last February, GIC teamed up with other international investors, including Saudi Arabia's Public Investment Fund and France’s Amundi and Credit Agricole Assurances, to acquire a 55% stake AccorInvest, a Luxembourg-based company that owns 891 hotels worldwide.
GIC doesn’t disclose its asset information, but it had $359 billion of assets according to last year's AI300, the list of Asia Pacific's top asset owners by AUM.
Source: GIC
SOUTH KOREA
National Pension Service (NPS) and other shareholders combined to oust Hanjin Group chairman and largest shareholder Cho Yang-ho from the board of Korean Air, a key affiliate of the chaebol, on March 27. It was the first time the head of a conglomerate in the country had been removed by shareholders and a sign of the pension fund's active approach to stewardship. NPS has a 12.56% stake in Korean Air.
Two days later, NPS failed in an attempt to increase board member accountability at Hanjin Kal, the holding company of embattled Hanjin Group. NPS, which has a 7.34% stake in Hanjin Kal, proposed removing directors with convictions for embezzlement or malpractice at its annual general meeting (Cho is accused of both). The motion needed a two-thirds majority of votes to pass but received just 48.66% of votes. Hanjin Kal shareholders also voted to reappoint Suk Tae-soo, Hanjin Kal's chief executive and a close confidante of Cho, as a director.
Cho is the largest shareholder of Hanjin Kal; he and his associates hold a 28.93% stake. KCGI is the second-largest, with 10.71%, but it hasn't held its shares long enough to make proposals. However it will have done so by next year, and Cho is expected to face more pressure at that point.
Source: Korea Times, Korea Joongang Daily, Asia Times
NPS also failed to stop the reappointment of Chey Tae-won, chief executive of Korean conglomerate SK, as an internal director of the group’s holding unit SK Holdings on March 27.
The pension fund, which has an 8.4% stake in SK, cited Chey's past record of hurting corporate value and shareholder interests when voting against him. But Chey managed to retain his seat by earning majority approval among participating shareholders. He and his affiliates control 30.88% of the chaebol.
Traditionally the SK Holdings CEO is also its chairman, but the holding unit separated the two roles during the same meeting. As a result, Chey lost the chairman role. SK said it expects the separation of the two roles to increase the board’s independence and improve the company’s corporate governance structure.
Source: Korea Joongang Daily
Corsair Infrastructure Partners (CIP) raised W263 billion ($231 million) from South Korean institutional investors, including Korea Scientists and Engineers Mutual-aid Association, Military Mutual Aid Association, in new funds launched to help the exit of its another fund from an airport developer and a port operator.
Earlier this year, Corsair Infrastructure announced that its new funds had acquired Canada-based airport developer Vantage Airport Group and a minority stake in DP World Australia, a port operator, from CIP-managed Gateway Infrastructure Investments and other financial investors.
In the fund dedicated to Vantage Airport, South Korean institutional investors put W93 billion via Seoul-based AI Partners Asset Management. Other investors include Shinhan Investment Corp., Shinhan Capital and SBI Savings Bank. Corsair Infrastructure, is an investment arm of New York-based private equity firm Corsair Capital. It manages $2.9 billion in assets.
Source: Korean Investors
South Korea’s financial firms are set to compete this week to become outsourced chief investment offices (OCIOs) in charge of the government’s unemployment and industrial accident insurance funds worth a total of W28 trillion.
The Ministry of Employment and Labor will choose one brokerage and one asset management firm from a pool of bidders, to respectively manage a state-owned W10 trillion unemployment insurance fund and a W18 trillion industrial accident insurance fund. The companies are required to make presentations on how they will manage the funds before a committee of experts and civilians on March 27 and 28, following which the Labor Ministry will decide on the OCIOs.
Local financial firms have been beefing up their OCIO portfolios since ministries and companies are increasingly bringing in outsiders to manage their investments. The firms that have entered this week’s bidding say the OCIO market is likely to include corporate retirement pension funds soon, and that this will act as a game changer. The corporate retirement pension funds managed by Korea’s financial institutions topped W172.1 trillion in September 2018 compared with W168.4 trillion in 2017, according to recent data from the Financial Supervisory Service.
Source: Korea Herald
Hanwha Life Insurance officially appointed Yeo Seung-joo as its co-chief executive along with vice chairman and CEO Cha Nam-gyu, for a push in its expansion drive that includes a bid after Lotte Card.
Yeo has spearheaded major acquisition deals of Hanwha Group since 2012 as its executive of strategic planning. In 2014, he was named the CEO of Hanwha Investment & Securities in recognition of his contributions in achieving big deals in which Samsung Group sold stakes in four chemical and defence units to Hanwha Group, and helped the securities affiliate make a turnaround. He has been managing all of the group’s financial units since July 2017.
Yeo is expected to lead M&A deals and unearth new growth engine businesses at Hanwha Life Insurance. Given his experience in successfully turning around Hanwha Investment & Securities, he is considered the best person to prepare the life insurer’s smooth transition before the introduction of IFRS17 and K-ICS accounting and capital standards, which will take effect in 2022.
Source: Maeil Business News Korea
INTERNATIONAL
US insurance firms have increased their use of exchange-traded funds, with $27.2 billion of their assets invested in such products as at year-end, a 37% rise from a year earlier, according to consulting firm Greenwich Associates.
Admittedly this is less than 1% of all insurance assets, found the study, done for State Street Global Advisors, one of the largest ETF providers. But the number of US insurers using ETFs tripled in 2017, with 62% of them now using these products a major ETF issuer (it launched the first one in 1993). Among non-users, some 82% said they would reconsider in the future.
Of those US insurers that don’t invest in ETFs, most avoid them because of state laws or internal guidelines prohibiting such investments – probably because they trade like stocks. The second biggest reason for shunning ETFs is because US insurers don’t think ETFs will help them beat market benchmarks.
Source: Chief Investment Officer; Greenwich Associates