Taiwan’s Bureau of Labor Funds (BLF) has appointed seven managers, including the local units of two European fund houses and one from Japan, for a NT$35 billion (US$1.22 billion) domestic relative return equity mandate.
The BLF, which supervises seven labour and annuity funds, opened the tender for the mandate in August.
The winning foreign bidders are Allianz Global Investors Taiwan, Prudential Financial Securities Investment Trust Enterprise, and Nomura Asset Management Taiwan. The local winners are Cathay Securities Investment Trust, Uni-President Asset Management Corporation, Fuh Hwa Securities Trust Co, and Fubon Asset Management Co.
The appointments are all for five-year terms and each company will manage NT$5 billion, including NT$3 billion for the Labor Pension Fund (LPF), Taiwan’s largest public retirement scheme, the BLF says in a statement on November 18.
Half of the balance NT$2 billion is for the Labor Retirement Fund (LRF), Taiwan’s largest defined-benefit retirement plan, and NT$500 million each for the Labor Insurance Fund and National Pension Insurance Fund.
The managers will invest in Taiwanese stocks traded on the domestic exchange and the over-the-counter market.
This is the BLF’s second hiring for a domestic mandate this year. It appointed eight managers for a NT$64 billion domestic absolute return equity mandate in April.
The coronavirus crisis has hit the performance of the external managers of BLF funds. The LPF and LRFs, its two biggest funds, incurred investment losses of 1.95% and 3.94%, respectively, in the nine months to September. Over half the assets in the two funds are overseen by external managers.
But the losses are unlikely to sway the BLF from continuing to outsource investments, and it’s also likely to maintain significant exposure to domestic stocks because of the strength of the local market, according to an investment consultant in Hong Kong.
As of November 19, Taiwan’s benchmark stock index was up 13.4% for the year.
Rising awareness of sustainability investing among Taiwanese institutional investors suggests environmental, social and governance (ESG) investments will also probably be a focus for the BLF.
The setback with investments this year is “unlikely to affect BLF’s tactical allocation to domestic equities, with the market’s strong fundamentals”, the consultant tells Asia Asset Management, speaking on condition of anonymity. “It is expected to further explore ESG-related opportunities locally.”
The BLF had around NT$4.45 trillion of total assets under management as of September 2020.