Taiwan's LPF targets high-risk global mandates

Taiwan’s Labour Pension Fund (LPF) is inviting global fund managers to bid for four mandates amounting to $400 million.

LPF's old pension funds scheme, which has NT621.6 billion ($21 billion) in assets, is requesting mandates for global real estate and global infrastructure securities. Each manager will receive $100 million for a five-year term. The pension fund LPF is seeking high-risk and high-return strategies, according to its website.

LPF will only consider fund managers with at least $5 billion in AUM and a three-year track record. Fund management houses must also have been established for three years as at September 30.

The managers must have branches, an operational venue or servicing team located in Taiwan. The alternative is to appoint a financial service provider with operations in Taiwan. The deadline for submission is January 21.

Although these are high-risk mandates, portfolios would not be allowed to short or use leverage, LPF notes. The target annual rate of return is 200 basis points above the benchmark index, after deducting for costs and tax.

For the global real estate securities mandate, the benchmark index is the FTSE EPRA/NAREIT Developed Index, while the global infrastructure securities mandate will track the UBS Global 50/50 Infrastructure & Utilities Index.

After the first year, LPF will conduct quarterly risk assessments, focusing on the target rate of return and tracking errors.

The first stage of the application process involves a qualification examination and the second a presentation, to take place in March.

Managers should propose their own management fees, with LPF entering fee negotiations in the third and final stage of selection. During negotiations, LPF will compare fees with market prices, as well as the standard fee schedule, which managers provide on other mandates.

LPF is run under an old and new pension funds system. The new scheme oversees NT1.1 trillion.