Taiwan's BLF pursues higher gains with $1.4bn absolute return mandate
Taiwan’s Bureau of Labor Funds (BLF) has launched a tender for an absolute return domestic investment mandate worth up to NT$45 billion ($1.4 billion), with target returns higher than previous mandates.
The mandate targets an annual return of 6.61%, which equals 300 basis points plus the average dividend yield of stocks listed on the Taiwan Stock Exchange over the past five years (3.61%), BLF said in an October 30 statement.
The target is reasonable given the pension manager’s double-digit fund yield performance year-to-date, Donna Chen, president of Keystone Intelligence, a Taiwan-based financial advisory firm, told AsianInvestor.
The target returns for such mandates in the past were usually set at 250 basis points more than the average yield dividend of the stocks, according to BLF's statement.
ASSET MANAGERS NEEDED
The rationale behind the change in requirement is based on the growth size of Taiwan stocks, BLF said, adding that the pension fund expects the managers to “actively create returns and improve the overall performance of the fund”.
BLF will appoint experienced professionals and experts to evaluate the proposals and pitches from the applicants, the pension manager told AsianInvestor in a response for comments.
The pension manager is aiming to hire up to five external asset managers for a five-year term, each managing $280 million.
In a move aimed at strengthening BLF’s commitment to environment, social and governance (ESG), the mandate also requires external managers to invest in companies that publish sustainability reports.
The mandate is on behalf of its Labor Pension Fund (LPF). BLF manages eight pension funds in Taiwan; LPF is the largest.
LPF’s fund yield as of September is 14.45%, compared to -6.67% at the end of 2023, according to data tracked by Keystone Intelligence.
BLF’s assets under management totalled NT$6.8 trillion ($210 billion) as of the end of September.
Outsourced assets accounted for 52.13% of its assets, while domestic exposure accounted for 42.95% of its portfolios.
IN LINE WITH ASSET ALLOCATION
The new mandate calls for applicants with at least three years of investment experience and a minimum $310 million of assets under management. Applications are open until November 27.
The selection process will be based on the managers’ past performance, profiles of investment managers and research teams, investment strategies and risk management approaches.
BLF said the launch of the mandate is part of a routine capital allocation, and funds will be used in accordance with the annual asset allocation plan.
The pension manager added it will continue with a diversified asset allocation approach across stocks, bonds, and alternatives.
EYE ON ESG
The pension fund manager also aims to play a role in guiding enterprises on sustainable development by leveraging the influence of capital markets.
It focused on ESG when it was searching for external managers for a domestic equity, relative return passive mandate in September 2023 as well.
The managers were tasked with only investing in listed companies with sustainability reports, and were required to illustrate whether the firm has na ESG investing team and their responsibilities in the selection process.
Six managers including Allianz Global Investors, Manulife Investment Management, Schroders, Nomura Asset Management, JP Morgan Asset Management, and Taiwan’s Mega Funds were hired.