Weekly investors roundup: Hong Kong's MPF widens scope; Korea's NPS narrows in on new CIO

TOP NEWS OF THE WEEK

Hong Kong’s Mandatory Provident Fund Schemes Authority (MPFA) has added three more investment options to the city’s largest retirement savings plan, including China funds and environmental, social and governance (ESG) funds.

The MPFA, which supervises the Mandatory Provident Fund industry, made the move in one of its regular adjustments of benchmarks for new fund approvals.

The latest adjustment includes eligible China A-share funds, single-country funds, and special funds such as those with ESG themes.

Cheng Yan-chee, managing director of MPFA, told reporters at a press conference on November 17 that single-country funds will be limited to those investing in the US, China and Japan, the world’s top three by market capitalisaton. As for ESG funds, the MPFA will assess their feasibility by comparing their counterparts in Asia Pacific in terms of underlying assets and performances.

Source: Asia Asset Management

National Pension Service (NPS) and sovereign wealth fund Korea Investment Corporation (KIC) plan to use the volatile financial momentum to discover new investment opportunities such as leveraged private equity and infrastructure assets.

Most of the investment assets are declining due to the prolonged Russia-Ukraine war, inflation and interest rate hikes but wisdom is needed to find strategies and ways to overcome the current situation, according to heads of the two institutional investors.

Source: Maeil Business News Korea

The world’s biggest asset management, state pension and sovereign wealth funds are passively invested in companies that have allegedly been involved in the repression of Uyghur Muslims in north-west China’s Xinjiang region, a new report says.

According to Hong Kong Watch, a UK-based research group, and the Helena Kennedy Centre for International Justice at Sheffield Hallam University, three major stock indices provided by index publisher MSCI include at least 13 companies that have allegedly used forced labour or have profited from China’s construction of internment camps in Xinjiang and its surveillance apparatus in recent years.

The report shows how leading asset managers, including BlackRock, HSBC, UBS and Deutsche Bank, are exposed to index funds that include companies accused of being complicit in rights violations.

Pension funds from Canada, the US and UK — including the Church of England’s fund — as well as Japan’s Government Pension Investment Fund and the New Zealand Superannuation Fund are also exposed.

Source: Financial Times

OTHER INVESTMENT NEWS

AUSTRALIA

Australian industry superannuation fund Spirit Super and global infrastructure manager Stonepeak have acquired the Port of Geelong from Brookfield and State Super for an undisclosed amount.

The Port of Geelong is the second largest port in Victoria, managing about $4.64 billion (A$7 billion) of trade and supporting more than 1800 jobs. It handles about 12 million tonnes of cargo and more than 600 vessel visits each year.

The global infrastructure manager and industry super fund will own 70% and 30% of the asset, respectively.

Source: Financial Standard

CHINA

Manulife Investment Management on November 21 announced that the China Securities Regulatory Commission (CSRC) has granted approval for Manulife Investment Management to acquire 51% of the shares in Manulife TEDA Fund Management from its joint venture partner, taking its ownership stake to 100%.

Upon completion of the transaction, Manulife Investment Management will become the first foreign wealth and asset manager to convert its joint venture into a 100%-owned public fund management company, and the first Canadian financial services company to wholly-own a public fund management company in China.

Manulife Investment Management has been a 49% foreign partner in the Manulife-TEDA joint venture since 2010. It has assets under management of USD 12 billion, as of 30 June 2022.

The full acquisition will enable Manulife Investment Management to better serve the growing investment needs of investors in the China market, and represents an important milestone in the wealth and asset manager’s growth ambitions in the country, the firm said in an announcement.

Source: Manulife Investment Management

China’s Sunshine Insurance Group has received approval from the Hong Kong stock exchange for an initial public offering that could raise about $1 billion, according to people familiar with the matter.

The Beijing-based company may start taking investor orders by end of this month at the earliest, the people said, asking not to be identified as the information is private. Sunshine Insurance filed pre-listing documents with the Hong Kong stock exchange in April.

IFR reported the approval earlier. Deliberations are ongoing and Sunshine Insurance’s listing hearing could still be delayed with IPO details subject to changes, the people said. An external representative for Sunshine Insurance declined to comment.

Source: Bloomberg

The China Banking and Insurance Regulatory Commission (CBIRC) on Friday (November 18) officially published rules and criteria under which banks and wealth management companies can participate in the country’s new private pension scheme after two weeks of public consultation.

The regulator also listed the names of commercial banks and wealth management companies that are the first batch to provide private pension services. In the list, BlackRock CCB Wealth Management is the only joint venture bank with foreign holdings.

Source: China Banking and Insurance Regulatory Commission

HONG KONG

The family office of Joe Tsai, Alibaba Group Holding’s co-founder, emerged this year as a major investor in InterContinental Hotels Group’s five-star property in the Portuguese city of Porto, which is a hotel fit for the world’s mega-wealthy, and one of the richest among them is behind it.

Tsai’s Blue Pool Capital also has an indirect stake in more than half-a-dozen five-star hotels across Spain that offer weekend getaways featuring gourmet experiences for around $1,000 a night, registry filings show.

The push into property isn’t new for Blue Pool — which also has holdings in US stocks and venture capital — though it has accelerated since last year.

Source: Bloomberg

INDIA

Kotak Investment Advisors, the alternative assets arm of Kotak Mahindra Group said on November 15 that it has secured $500 million from a subsidiary of Abu Dhabi Investment Authority (Adia) for its new $1 billion real estate fund.

Kotak aims to primarily invest in residential opportunities in India with the new fund. The launch of the fund comes less than five months after Kotak closed its 12th real estate fund focused on office property after raising $590 million from ADIA.

Source: Hindustan Times

KOREA

The National Pension Service (NPS) closed the window for new chief investment officer applications on November 11, with the two major candidates coming from sovereign wealth fund Korea Investment Corporation (KIC) and retirement fund Government Employees Pension Service (GEPS).

Set to be chosen as early as January 2023, the recruitment of the new CIO is expected to be a run-off of the two external candidates: former KIC CIO Park Dae-yang, or David Park, and former GEPS CIO Seo Won-joo.

NPS’ acting CIO Park Seong-tae, managing director of the fund's investment strategy and responsible investment and governance, didn’t apply for the position.

Source: Korea Economic Daily

Furthermore, NPS is set to receive a tax refund of W30 billion ($22.4 million) from the US Internal Revenue Service (IRS) and has also claimed tax returns of nearly W70 billion from European Union nations.

The W30 billion refund is from non-taxable gains that it has earned from the transfer of US-based real estate assets. The US federal tax bureau will return the amount once it gets final approval from the US Congress budget committee.

Through research for more than a year, NPS fund management found that the pension fund qualifies for the tax benefit and applied for the refund. Other Korean pensions and retirement funds are expected to follow NPS’ procedures to also seek partial tax returns.

Source: Korea Economic Daily

Hanwha Life Insurance will redeem $1 billion in subordinated capital securities issued 2018 on the first call date in April 2023 as planned, quelling brewing speculation about a possible waiver in the option after it failed to issue new debt in September amid scare from a public debt default.

“We have informed through various channels that we will exercise the call option as planned and are moving on the schedule,” Hanwha Life said in a press release November 16.

Korean insurers’ call issue has added scare over Korean papers after midsized Heungkuk Life alerted not to exercise the call on its 30-year hybrid bonds on the first call date that usually falls five years after issue. The insurer ended up paying the bondholders on the call date last week.

Source: Maeil Business News Korea

Also read: Heungkuk Life shakes up Korean financial markets with delayed call option redemption

Meanwhile, the absence of insurers as major investors of long-term debt has been worsening Korean debt troubles.

The insurers have been watching their capital ahead of the new International Financial Reporting Standard 17 (IFRS 17) going into effect in January 2023. They also must have liquidity ready in case of mass withdrawals from retirement funds due to worsening economic conditions and higher return offers during tightening environment.

According to industry sources, about 30% of retirement funds - W71.79 trillion ($53 billion) worth of life insurance products and W34.95 trillion worth of non-life programs - are expected to mature next month.

Source: Maeil Business News Korea

Hanwha Life and Indonesia's Lippo Group have joined hands to promote cooperation in discovering future growth engines. Lippo Group is one of the largest real estate developers in Indonesia.

The two sides signed a strategic memorandum of understanding (MOU) on business cooperation on November 16 in Jakarta, Indonesia’s capital. In the future, the two companies will cooperate in various business areas such as finance, digital and healthcare, to discover future growth engines apart from the insurance industry.

Source: BusinessKorea

TAIWAN

Taiwanese banks and life insurers have reduced their exposure to China to a record low due to the COVID-19 pandemic, economic uncertainty and a declining property market, data released by the Financial Supervisory Commission (FSC) on November 17 showed.

Life insurance firms last quarter cut their investment in China for the sixth consecutive quarter, with their combined investment sliding to NT$148.5 billion ($4.8 billion) at the end of September, the lowest in the past 25 quarters, the commission said.

China’s tensions with the US, its strict COVID-19 controls and troubled property market have made local insurers more conservative about investing in China, the commission said.

Source: Taipei Times

Taiwan expanded tax breaks for companies that invest in technology research and production in an attempt to strengthen the island’s semiconductor industry and help maintain its leading position in the global chip supply chain.

Tech firms will now be able to lower their income tax bill by a quarter if their spending on research and development hits a set level, according to the amendments approved Thursday by Taiwan’s cabinet. The measure also gives another 5% tax break to companies whose investment in advanced equipment reaches a set level, and is aimed at encouraging them to keep spending on production and development in Taiwan.

Source: Bloomberg

INTERNATIONAL

PFA, Denmark’s largest commercial pension fund, has exited two Chinese clothing manufacturers and is discussing how to handle its other China holdings amid an evolving risk environment.

The Copenhagen-based fund, which manages about $100 billion in assets, has sold out of Anta Sports and Li Ning, Rasmus Bessing, chief operating officer at PFA Asset Management, said in an interview. The holdings were worth around $4.2 million, he said.

“We see China and the political development and believe that there is an increased political risk associated with Chinese companies,” Bessing said. PFA hasn’t acted “solely due to political reasons,” but such considerations are “an increasing concern,” he said.

Source: Bloomberg

US Maryland’s $60 billion pension fund could become the next major retirement system to trim its China holdings in response to geopolitical concerns and uncertainty about future returns.

Directors of the Maryland State Retirement and Pension System decided on November 15 that they will look at ways to reduce their allocation to China stocks or otherwise hedge against a downturn in Chinese markets at their next investment committee meeting in February. The Maryland pension fund’s total exposure to China across all asset classes is about 7%.

Board members will view an updated set of return and risk projections and an analysis of the upsides and downsides of various options for mitigating risk in China at the February 15 meeting, pension officials said.

One option floated by pension officials at Nov 15 meeting would be to halve China’s share of the fund’s emerging markets benchmark. That would effectively cut the pension fund’s China stock allocation to 1.5% from 3%. The Teacher Retirement System of Texas made a similar decision in September.

Source: Wall Street Journal

The Canada Pension Plan Investment Board (CPPIB) committed $301 million to CVC Capital Partners Asia VI in the third quarter of 2022, according to its latest report.

CVC Capital Partners is a global alternative asset manager focused on private equity, secondaries and credit. It closed its fifth Asia Pacific fund at a hard cap of $4.5 billion in 2020, which exceeded its original target of $4 billion.

The report stipulates the CPPIB made at least $726 million in total commitments to Asia in the third quarter, which included — a $230 million commitment to Kotak Infrastructure Investment Fund, an investment arm of Kotak Mahindra Group which provides financing for infrastructure projects in India; $56.4 million in a mezzanine loan backed by a Grade A office and retail property in Shanghai; and, $138.5 million in the Hong Kong IPO of a leading duty-free operator in China, the China Tourism Group Duty Free.

Source: CPP Investments