This week in asset owner history: BLF to increase foreign equities
Taiwan’s Bureau of Labor Funds (BLF) has been increasing its share of overseas investments in the past few years.
However, the turbulence in global public markets over the past 12 months has encouraged the fund to adopt a more conservative approach.
The government entity manages eight pension funds, including six labour funds.
In 2018, then-head of BLF, Tsay Feng-Ching said the government entity was looking to increase its exposure to Europe and Japan on the back of macroeconomic improvements in the two regions.
“...we should reconsider several developed countries, and Europe and Japan are two regions that we pay attention to as they will likely expand at a faster rate,” Tsay told AsianInvestor.
Tsay said BLF would initially prioritise increasing its equity exposures to the two markets.
Also read: BLF set to introduce drastic reforms under new chief
MANDATE HESITATION
In 2018, overseas allocations accounted for 48% of BLF's portfolio, with Tsay expecting this to increase to above 50% by the end of that year.
In February 2021, Tsay was transferred to the Labour Ministry as a counsellor following a bribery scandal at BLF that involved another senior official.
By the end of 2022, the entity’s six labour funds had a total AUM of NT$5.54 trillion ($181.4 billion), of which 53.32% was invested overseas.
Furthermore, 52.35% of the total AUM was managed externally. The total AUM split between asset classes were 44.39% in equities, 42.92% in fixed income and 12.69% in alternatives, according to BLF data.
In August 2022, the fund started turning conservative in its investment approach. Following the half-year results, BLF’s second mandate of 2022 was closed for application as of August 10.
It was a $3 billion absolute return bond mandate on behalf of Labor Pension Fund - the largest pension fund under BLF supervision - to be managed by six managers with $500 million each, under a five-year term.
The request for proposal was announced on July 5. The mandate was to be benchmarked against the US 3-month Treasury bill yield plus 2.5%.
Also read: BLF turns conservative on overseas mandate after record half-year losses
In 2022 overall, BLF’s six labour funds lost NT$352.9 billion, or 6.71% in 2022, with AUM standing at NT$5.54 trillion as of end-2022.
Also read: Taiwan's BLF set to gain $5bn in January after record 2022 loss