Taiwan BLF invites bids for $5.3bn in mandates

Taiwan’s Bureau of Labor Funds (BLF) has invited fund managers to submit bids to run $5.3 billion of global portfolios across 21 segregated five-year mandates. These will comprise 12 portfolios totalling $3.2 billion for the state pension fund's first global multi-asset allocations and nine for $2.1 billion across enhanced Asia-Pacific equity strategies.

The BLF aims to further diversify its $89 billion in assets to achieve a stable return by adding more alternative and smart-beta index investments. These mandates – which the BLF had initially flagged in October – will boost its externally managed assets to $24.3 billion next year from $19 billion currently.

Following the BLF’s usual practice in joint mandates, it will allocate the mandates among its sub-entities. Asset managers must submit bids by 5pm on January 25.

The global multi-asset mandates will be allocated as follows: $1.8 billion across four managers, each receiving $450 million, for the Labor Pension Fund (LPF) (new scheme); $600 million across four managers, $150 million each, for the Labor Retirement Fund (LRF) (old scheme); and $800 million across four managers, $200 million each, for the Labor Insurance Fund (LIF).

Applicant managers should be running an existing multi-asset strategy with a track record of at least three years – simulated performance data is not allowed. The BLF, winner of the public pension fund category in AsianInvestor’s second annual Institutional Excellence Awards, categorises multi-asset mandates as alternatives exposure. 

“This is a new concept to gain a total and absolute return amid volatile market conditions,” said Liu, Li-ju, deputy general director at the BLF, last October, when the institution first mentioned its plans to move into these strategies. 

The enhanced Asia-Pacific mixed equity mandates will be allocated as follows: $1.5 billion across three managers, $500 million each, for the LPF (new scheme); $300 across three managers, $100 million each, for the LIF; $300 million across three managers, $100 million each, for the National Pension Insurance Fund.

This move into smart-beta exposure is part of the BLF’s objective of diversifying beyond active allocation into more index investments, Liu said. The institution currently has $6.2 billion in smart-beta strategies.

The institution has been steadily increasing its investments in alternative and index assets since early 2014, when it voiced its intention to raise its alternatives exposure to 6% from 2.3% of its overall portfolio at the time.

The requirements for managers for the planned new mandates are set out on the BLF’s website, including conditions, selection criteria and details of how to apply. 

Liu said the new mandates followed the institution’s aim to diversify its asset allocation. “We are cautious about risky assets, although economic global economic growth in 2016 should be better than in 2015. Within global equity exposure, we will focus on Asian equities.”