Speculation woes haunt Taiwan pension fund industry
13 November 2012
News, Asia, Taiwan
By Hui Ching-hoo
The substantial losses engendered by speculative stock trading among Taiwan’s largest pension funds’ delegated managers has raised public concern over the financial stability of the island’s pension fund industry.
The saga emerged as local media revealed that domestic managers of the Labor Pension Fund (LPF) and Labor Insurance Fund (LIF) allegedly speculated in Taiwanese equities to an excessive extent, resulting in losses of NT$54.34 million (US$1.8 million).
Keystone Intelligence Managing Director Donna Chen tells Asia Asset Management that Taiwan’s regulator has stepped in to investigate the issue. The body has also studied the feasibility of strengthening selection criteria and due diligence in regard to external fund managers. Some managers fret that the market watchdog will reduce the proportion of funds that can be outsourced.
The Securities Investment Trust and Consulting Association (SITCA) said in a statement on November 8 that the issue had tainted the industry’s image. The association has urged its members to reinforce ethical conduct.
The fiasco coincides with media reports that the four largest pension funds – LPF, LIF, Public Service Pension Fund, and the National Pension Program – succumbed to total losses of NT$89.8 billion last year. The poor performance provoked discussions about reducing the pension fund outsourcing ratio.
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