Taiwan’s Bureau of Labor Funds (BLF), the supervisory body of the island state’s labour pension funds, is looking for a new custodian for the National Pension Insurance Fund (NPIF)’s foreign investments, suggesting the agency isn’t renewing its contract with US financial services company BNY Mellon.
The NPIF, the fundamental social protection scheme in Taiwan, has lagged other BLF pension funds in its foreign investments because of its relatively small asset size. The BLF has been increasing the NPIF’s overseas exposure in recent years to diversify its portfolio risks.
The BLF said in a statement posted on its website on May 2 that it is seeking an overseas investment custodian to provide custodial services for the NPIF’s mandated and self-directed investments, totalling US$10 billion.
A BLF spokeswoman tells Asia Asset Management (AAM) that the contract with the existing custodian – which she didn’t name – is expiring, hence the search for a replacement.
According to an industry source, the current custodian is BNY Mellon. Typically, if the BLF was satisfied with the custodian’s performance, the contract would have been renewed, the source tells AAM.
The BLF’s statement says the position is open to foreign and domestic financial institutions. Foreign applicants are required to have a branch office or subsidiary in Taiwan. All eligible applicants must have at least $500 billion in assets under custody as of December 31, 2016.
Applications will be open until June 6, 2017. The custodian selected will serve for five years.
Separately, AAM understands the BLF has named four global managers – Northern Trust, Deutsche Bank, BlackRock, and State Street Global Advisors – for its $2.4 billion passive environmental, social and governance (ESG) global equity mandate, its first sustainable investing-related mandate.
Each company will manage $600 million of funds, of which $250 million will be on behalf of the Labor Pension Fund (LPF), the largest defined contribution retirement scheme supervised by the BLF. Another $150 million will managed for the Labor Retirement Fund, the defined benefit retirement plan for Taiwanese workers, and $100 million each will be for the NPIF and the Labor Insurance Fund, the island state’s largest labour insurance plan.
According to the BLF’s latest report for members, its affiliate pensions recorded total revenues of NT$16.2 billion (US$539.4 million) in the first two months of this year, boosting the total AUM to NT$3.33 trillion as of the end of February from NT$3.19 trillion in June 2016.
