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Taiwan's BLF opens tender for US$2.3 billion global corporate bond mandate

Taipei city
By Asia Asset Management  
July 7, 2020

Taiwan’s Bureau of Labor Funds (BLF) has opened tender for a US$2.3 billion global corporate bond mandate focusing on sustainable investments after delaying it earlier in the year because of the coronavirus pandemic.

The BLF, which supervises the island’s labour pension funds, is looking to hire five international managers who will each be appointed for a five-year period, it says in a statement on July 3.

The mandate will be benchmarked against an underlying index that is “enhanced” to incorporate environmental, social and governance (ESG) elements.

This is the BLF’s second global sustainability investment after its $2.4 billion ESG equity mandate in 2017, Liu Li-ju, deputy director general of the pension supervisor, tells Asia Asset Management.

“We originally planned to tender the mandate earlier this year, but the process was postponed for several months as some foreign managers were not able to come to Taiwan for presentations due to the coronavirus crisis,” she says.

The five winning bidders will each oversee $460 million of investments.

The statement says $400 million is for the Labor Pension Fund, Taiwan’s largest public retirement scheme, and another $60 million is for the National Pension Insurance Fund. Ms. Liu says the BLF has not planned on introducing it to the other funds under its supervision.

She also says the BLF will speed up outsourcing of bond and alternative investments because it’s underinvested in these asset classes versus the targeted level.

She expects the share invested in bonds to decline further this year as the BLF’s pension assets grow, and as such, the exposure will have to be increased.

“Our fixed income allocation is currently around 17.5% of total assets, which is lower than our target at 21%,” she says, adding that allocation to alternatives or non-mainstream investments will be raised from 11% to 13%.

Managers eyeing the new corporate bond mandate must have at least $5 billion of total assets globally, and a minimum three-year track record in enhanced global corporate bond investment, in order to be eligible to bid.

Applications are open until August 10.

The BLF had around NT$4.69 trillion ($159.2 billion) of total assets as of end-May 2020.