Taiwan's LPF readies local mandates worth NT$24 billion
The Labour Pension Fund, the $25 billion dollar pension body in Taiwan, says it is soliciting bids for eight mandates worth a total of NT$24 billion to invest in the domestic market. The mandates will be good for three years.
The LPF has set an annual performance target of 9% a year. Fund managers will be paid on a scale of eight basis points to 60bp a year depending on how close they come to achieving the LPF's target.
The LPF is open to suggestions as to how the fund managers invest the money domestically. Creativity matters, given that the Taiex is already trading at a price-to-earnings ratio of 63.18x after recent surges. It has been a long, rocky ride from the shocking low of 7.72x on November 22 last year.
It is interesting to note that the LPF is open to the idea of fund managers using derivatives for the purpose of investment enhancement. Previously, public funds in Taiwan restricted derivatives use for the purpose of risk management. And now the allocation to the area can be up to a maximum of 15% of net assets.
Interested managers, with a minimum AUM size of NT$10 billion ($307 million) as of end of April, are advised to submit their pitches no later than June 4.
The LPF has made the point that it wants incoming documents to be printed on recycled paper, and pages should be printed on both sides.
Bidders must also pay a NT$20 million application guarantee deposits -- an amount which will be refunded five days after the applicants are cut from the shortlist or after the contract term ends, whichever applies. The supervisory committee highlights in its latest notice that it is not planning to pay interest on this money.
Short-listed candidates will need to send in their investment managers for a 10-minute presentation and a 20-minute Q&A with the fund's supervisory committee. The LPF also reminds non-presenting fund execs not to linger in the venue or eavesdrop on others' presentations.
The LPF is made up of NT$340.31 billion in funds managed under the New Labour Pension Fund, which are assets accrued in its new defined contribution system; and NT$471.62 billion from the Old Labour Retirement Fund that are assets leftover from its former defined benefit system.
According to the annual report by the fund's supervisory committee, the LPF now outsources 13.47% of its overseas investments from the new portfolio, and 5.29% of the old system, to external fund managers.
It also maintains its own overseas portfolios, respectively sized at NT$13.92 billion and NT22.87 billion, representing 4.09% and 4.85% of the individual systems.
The LPF's last activity in the overseas investment market was in late October last year, when it completed funding for its global fixed income and global equity mandates that were awarded to fund managers over the summer.
The New Labour Pension Fund took in new contributions totalling NT$114.68 billion in 2008. This compares to NT107.45 billion in 2007 and NT$100.57 billion in 2006.
It has yet to announce plans for its global portfolio mandates this year.