Taiwan's LPF seeks investment consultant

Labor Pension Fund, Taiwan’s biggest state institution with some $45 billion in assets, yesterday invited foreign investment consultants to pitch for advisory work on international mandates for bonds, equities and alternative assets.

The successful consultant will work until the chosen fund managers sign contracts with LPF, which did not reveal the size of the planned portfolios. The deadline for receipt of applications is March 12, and the maximum consultancy fees to be paid will be NT$3.6 million ($122,000).

The consultant will advise LPF on the content, size and investment guidelines of each mandate. In some cases, it will also help with manager selection, portfolio allocation and risk management.

LPF expects to issue the RFP for external asset managers in April at the earliest, but most likely in mid-year. The mandates will cover three asset classes – equities, bonds and alternatives – whereas last year it issued RFPs for equities and alternatives, and in 2011 for equities and bonds.

LPF also this week issued two domestic absolute-return RFP mandates, one under its old pension system and one under the new system, each for NT$30 billion ($1 billion). The application deadline is March 18.

The four-year mandates will be shared among six managers, with each running NT$5 billion. They can buy domestic listed securities, corporate bonds and government bonds, and the target return is 9% annually.

Last year LPF also issued two NT$30 billion mandates, one in February for the old pension system and one in May under the new system. These mandates were also shared among six fund managers and had a target annual return of 9%.

The fund was criticised at the time for having unrealistic expectations of returns and paying low fees. It responded to these comments in a letter to AsianInvestor in June.

Other institutional investors in Asia have been making more use of investment consultants as they move to boost their offshore exposure. Thailand's $30 billion Social Security Office (SSO) said in May 2011 it was looking to hire a consultant to provide advice on asset-and-liability management and global strategic asset allocation.

The SSO could not be reached for confirmation by press time as to which firm it chose.

Taiwan's LPF had $26.18 billion in AUM for the new system and $18.94 billion for the old system as of March 2012, by AsianInvestor numbers.