Taiwan’s BLF launches $2.3bn equity mandate with ESG focus
Taiwan's Bureau of Labor Funds (BLF) issued a request for proposal (RFP) for its first domestic equity mandate of the year, worth up to NT$72 billion ($2.25 billion).
In order to “actively guide enterprises on sustainable development”, the largest pension body in Taiwan will require selected managers to have sustainability reports, and invest only in listed companies with such disclosures.
BLF plans to hire up to six managers under a five-year term, for the relative return passive mandate for its Labor Pension Fund (LPF) and National Pension Insurance Fund (NPIF).
The pension body will allocate NT$54 billion to LPF, and NT$18 billion to NPIF, with each manager managing NT$9 billion and NT$3 billion respectively.
It is benchmarked against the Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX).
“Through a passive mandate, we aim to obtain returns from the Taiwan stock market at a relatively lower cost, and jointly construct a diversified investment portfolio together with the absolute return mandate to disperse investment risks and enhance returns,” BLF’s deputy director general Liu Li-ju said in a statement on Sept 11.
Liu also noted that enterprises in Taiwan have solid fundamentals, having benefitted from the territory's post-Covid normalisation and the development of emerging technologies such as artificial intelligence (AI).
“Considering the long-term stable prospects of Taiwan's economic and corporate fundamentals…the mandate is to strengthen the core domestic exposure to participate in economic growth,” Liu said.
BLF currently manages eight pension funds in Taiwan, with LPF being the largest.
As of the end of July, BLF managed NT$6.48 trillion ($202.6 billion) in assets. Its investment return in the seven months ended July was 11.44%.
Outsourced assets accounted for 52.35% of the total assets under management, while domestic exposure was 44.53% of its total AUM.
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“The performance of Taiwan stocks is consolidating,” said Donna Chen, president of Keystone Intelligence, a Taiwan-based financial advisory firm.
Year-to-date the TAIEX has yielded returns of 16.6% as of Wednesday (Sept 13).
“A passive mandate relative to the benchmark is the safer choice for a public pension fund,” Chen told AsianInvestor, noting that the management fee of a passive mandate is also lower compared to an active strategy.
LEADING IN ESG
In an exclusive interview with AsianInvestor earlier this year, BLF’s director general Su Yu-ching said since 2022 the pension fund has made it mandatory for external managers to invest in domestic companies that have sustainable reports available.
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Through the requirements, BLF hoped to “utilise the influence of capital markets” to drive Taiwan’s ESG development, Liu said in the new RFP statement.
In the request, BLF asked bidding managers to illustrate clearly whether the firm has an ESG investing team and their respective responsibilities.
Also, BLF required fund managers to demonstrate how they incorporate socially responsible investing into stock selection. Namely, whether they have negative or positive screening mechanisms, and do they have enhanced measures on ESG investing analysis from 2020 to 2023.
“BLF is a leading investor in Taiwan. Any measures they take on ESG and responsible investing will no doubt help accelerate such development in Taiwan, especially among financial institutions,” Keystone Intelligence's Chen said.
Meanwhile on September 8, BLF announced the four managers selected for its $2 billion global passive equity mandate. They are Amundi Asset Management, Legal & General Investment Management, State Street Global Advisors Asia, and The Northern Trust Company of Hong Kong.
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Each manager will manage $400 million for the Labor Pension Fund, and $100 million for the National Pension Insurance Fund against the MSCI All Country World Index.
The RFP was issued in May and is BLF’s first global mandate in 2023.