TAIWAN -Taiwan's US$15bn Bureau of Labour Insurance (BLI), a state-owned pension fund, has awarded its first four international investment mandates worth $400m covering global fixed income and global equities.
Plans to award a further two mandates were scuppered after the BLI wanted to pursue an absolute return strategy, but this meant relaxing restrictions on the use of derivatives as underlying investments. BLI executives in Taiwan balked at the suggestion of rule changes.
“It just wasn’t an option at the end of the day because of the regulator’s concerns over stability in the market,” said a spokesman for the BLI.
These mandate awards are the culmination of a strategy to use offshore talent that began in March at an industry-wide BLI seminar in Taipei.
Alliance Capital and PIMCO won the fixed income mandates, and Alliance-Bernstein, and Wellington International Management won the equities work.
All the mandates are for four-year terms, and depending on performance may be extended for another four-year term. Managers have a window to negotiate separately to increase fees should they win additional allocations.
The first two $100m mandates in global fixed income, will be benchmarked against the Lehman Global Aggregate index and will be required to beat the index by a modest 0.75% net of fees, fully hedged to the US dollar.
The second two $100m mandates for global equities, will be benchmarked against the MSCI World Index on an unhedged basis, and required to outperform net of fees by 1.5%.
The BLI is the third state-owned pension fund to issue international mandates, following the Public Service Pension Fund and Chunghwa Post. It considered managers with a minimum of $25bn of assets under management globally, a three-year track record, and compliant with GIPS or AIMR standards of performance measurement.
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