Weekly investors roundup: Japan's life insurers shun foreign bonds; Taiwan's PSPF suffers loss
TOP NEWS OF THE WEEK
Japan’s life insurers are bailing out of foreign bonds at a record pace and offloaded a net ¥1.9 trillion ($14.1 billion) of overseas debt in November, an all-time high, according to preliminary portfolio flow data from the Finance Ministry on December 8.
Separate balance-of-payments data for October showed Japanese investors overall were net sellers of U.S., French and German debt. The cost to hedge positions against swings in the yen has surged this year after the currency slumped to a three-decade low amid a widening yield differential between the US and Japan and the latter’s deepening trade deficit.
A three-month hedge against the US dollar costs about 4.9%, according to data compiled by Bloomberg. That has made Treasuries deeply unprofitable for Japanese investors — the largest overseas holders of US debt — among whom insurers play a high-profile role.
Source: Japan Times
Also read: Japanese life insurers flock back to JGBs for their relatively higher yield
Public Service Pension Fund (PSPF) suffered an investment loss of NT$59.79 billion ($1.95 billion), or 8.38%, for the ten months ended October, incurring losses for ten consecutive months this year, according to a report published on December 1.
The loss narrowed slightly from NT$64.3 billion in the nine months through September. The pension fund didn’t provide any analysis or investment outlook.
Taiwan’s benchmark stock index plunged over 29% by the end of October, and the S&P Taiwan bond index fell around 7% over the period.
Source: Public Service Pension Fund
Korea Investment Corporation (KIC) has made its first direct investment in an asset management firm. The sovereign wealth fund has acquired a passive, non-voting minority stake of less than 5% in US direct lending and credit asset manager Golub Capital and its affiliates.
Golub Capital said it plans to use the proceeds from KIC’s investment to further enhance its ability to deliver financing solutions to private equity sponsors. The deal value was not disclosed.
Source: KIC
OTHER INVESTMENT NEWS
AUSTRALIA
Nexus Hospitals (Nexus)—owned by QIC since 2019—has acquired Montserrat Day Hospitals to create the largest short-stay hospital platform in Australia, according to an announcement on December 8.
Nexus has purchased the Montserrat Day hospitals, which consists of a portfolio of eight hospitals and three clinics, from the Healius group for approximately $94 million (A$138.6 million).
Following this acquisition, Nexus will operate a portfolio of 29 short-stay hospitals across Australia. The acquisition builds on QIC Infrastructure’s 2019 investment in Nexus, a leading Australian short-stay hospital platform, and actively demonstrates the execution of a sector centric, thematic-based investment strategy, of which healthcare is a core focus.
Source: QIC
CHINA
Chinese regulators asked the nation’s biggest insurers to buy bonds being offloaded as retail customers pull their cash from fixed-income investments, according to people familiar with the matter.
At a meeting on December 7, Chinese regulators told top insurers to backstop the market and buy bonds sold by wealth management units at banks to prevent further volatility, said the people, who asked not to be named discussing internal deliberations. Some banks also proposed to use their proprietary trading desks to scoop up bonds, one of the people said.
The guidance, handed down at a meeting that was also attended by big lenders, came as Chinese traders and retail investors have been ditching fixed-income assets and pouring money into stocks on growing economic optimism as China rolls back its strict Covid Zero approach. The turmoil last month, which saw large withdrawals from bond-backed wealth management products, earlier also prompted regulators to ask banks to report on their liquidity situation.
Source: Bloomberg
Ping An Group and FTSE Russell launched the FTSE Ping An China ESG Index Series as a part of a new strategic partnership. The index series will enable domestic and offshore investors to better integrate sustainability considerations into their investment approach in China, they announced on December 8.
The launch aims to provide them with access to opportunities and orient funds towards companies with strong ESG performance in China’s capital markets.
It combines Ping An’s proprietary China ESG data and ratings into FTSE Russell’s China indices. Using the Ping An CN-ESG framework covering 4,000 China A-shares for an overall rating, scores are translated into index weightings.
Source: Ping An Group; LSEG
Fidelity International’s wholly foreign-owned enterprise (WFOE), FIL Fund Management (China) Company, has been granted the permit to conduct securities and futures business in China by the China Securities Regulatory Commission (CSRC) on December 9, making it one of the first global asset managers to establish a wholly-owned onshore mutual fund business in China.
The permit will enable Fidelity to offer onshore investment products and solutions to retail clients and asset management services to institutional clients in China.
Since 2004, Fidelity has built up three offices in Shanghai, Dalian and Beijing and today has over 1,900 employees in China. Under the previous Qualified Foreign Institutional Investor (QFII) scheme, Fidelity was awarded a quota of US$1.2 billion, one of the largest amounts for any fund manager. In January 2017, Fidelity was the first global asset manager to register with the Asset Management Association of China (AMAC) as a private fund management (PFM) company.
Source: Fidelity International
HONG KONG
Hong Kong billionaire Richard Li is weighing investing about $200 million in his insurance company FWD Group Holdings as part of a funding round, people familiar with the matter said.
An investment would help support the insurer’s growth plans ahead of a long-awaited Hong Kong initial public offering, which could take place as soon as 2023, the people said. Other investors have also shown early interest in fundraising for FWD ahead of its listing, the people said.
Terms of the funding round are still under consideration and details such as the size could change, the people said, asking not to be identified because the matter is private. A representative for FWD declined to comment.
Source: Bloomberg
INDONESIA
Indonesia Investment Authority (INA) signed an investment framework agreement with Danish Investment Fund for Developing Countries to explore investment opportunities to advance green energy transition and inclusive social development in Indonesia, including prospective co-investments in renewable energy, water, waste management, and other circular opportunities.
The target total value of the joint investments is expected to reach up to $500 million. IFU and INA has the ambition to provide capital to green and sustainable projects in the range of $100 million, respectively. Together, the two investors will use their leverage to seek potential co-investors contributing towards the remaining target, the two parties said in the announcement.
Source: INA
JAPAN
Hines, a real estate investment, development and property manager, has acquired 11 multifamily properties in Japan through its flagship commingled Asia Pacific core plus fund, Hines Asia Property Partners.
The more than 400 units in Tokyo, Nagoya and Fukuoka is the first multi-family investment for the in Asia Pacific but the fund plans to expand that portfolio further, targeting to scale up to $1 billion of asset value in three to five years.
Source: Hines
KOREA
Korea’s Ministry of Economy and Finance has formally requested the country’s largest institutional investor National Pension Service (NPS) and its competent authority Ministry of Health and Welfare to hedge 10% of the value of its foreign assets against a foreign currency exchange rate risk for at least six months, according to investment bank industry sources on December 7
The government’s move is part of its efforts to prop up the country’s local currency won that has depreciated rapidly against the US dollar in value. A policy shift could also trigger other public fund operators to follow suit, which could be a big relief to the local currency.
NPS’s foreign investment amounts to $335.5 billion as of September 2022. The fund has been running its foreign investment operations without hedging since 2018.
Source: Maeil Business News
NEW ZEALAND
Amber Infrastructure Group has agreed to acquire five New Zealand infrastructure assets from Morrison & Co for approximately $128 million (NZ$200 million).
Under the agreement, the five assets — which mainly comprise of schools and student accommodation property — from Morrison & Co’s Public Infrastructure Partners portfolio will be 100% owned by the Amber-advised, London-listed investment company, International Public Partnerships Limited.
Amber’s acquisition of the five assets from this fund represents its entry into the New Zealand market, providing the investment manager with a significant presence in the country and a platform for further growth.
The transaction remains subject to regulatory approvals, including from New Zealand’s Overseas Investment Office (OIO), counterparty consents and other standard conditions.
Source: Amber Infrastructure
TAIWAN
A hike of the National Pension Insurance premium rate to 10% scheduled for January 1 is likely to affect 2.71 million people, reports said December 9.
Since 2015, the insured amount remained unchanged at NT$18,282 ($596). However, because of fears that the fund will not have enough money to pay for pensions during the next 20 years, the amount will rise to NT$19,761 beginning next month.
As a result, the National Pension Fund will see its income increase by NT$2.4 billion per year.
Source: Taiwan News; Liberty Times; Radio Taiwan International
Taiwan’s life insurance firms have raised their exposure to foreign assets to the maximum allowed under local regulations in order to diversify risk as US rate hikes drove up global market volatility this year.
Figures from Fitch Ratings show that the overseas investment allocation of Taiwanese life insurers was at the 70% cap in the third quarter of the year, up from 66% in the fourth quarter of 2021.
“The life insurers raised their foreign investment to diversify their portfolio risks in light of the rise in interest rates,” says Anthony Lam, associate director for insurance at the rating agency.
Source: Asia Asset Management
INTERNATIONAL
CPP Investments has reportedly abandoned its effort to study investment opportunities in the cryptocurrency market, two sources close to the matter told Reuters on December 7.
The exact reasons behind Canadian pension fund’s abandonment of crypto research are not currently known with any certainty. CPP Investments declined to comment on the report but state that it currently has no direct exposure to cryptocurrency.
In early 2021, CPP Investments' Alpha Generation Lab—which examines emerging investment trends— had formed a three-member team to research crypto and blockchain-related businesses to investigate any possibility of exposure for the fund. The pursuit was abandoned this year, according to the anonymous sources.
Source: Reuters