Fund move heralds sea change

After the Postal Savings Fund (郵政儲金) lost more than NT$50 billion in the stock market last year, Yeh Chu-lan (葉菊蘭), Minister of Transportation and Communications, decided to quickly put the NT$300 billion fund under the care of outside professionals. Market watchers have applauded the decision, saying that this is a turning point in the management of government funds.

During a budget review meeting at the Legislative Yuan on Monday, reports that the Postal Savings Fund -- which is managed by the Directorate General of Posts (郵政總局) under the supervision of the transportation ministry -- racked up some NT$58 billion in stock market losses last year. According to lawmakers, the losses have not only reduced tax revenue, but also may affected the postal worker pension fund this year.

The Postal Savings Fund alone lost NT$58 billion in the stock market, sending its year-end balance NT$37.5 billion in the red.

Under strong pressure to limit any further losses, Yeh said the Postal Savings Fund would authorize its management to outside professionals within two months.

"Losses in the postal savings fund have been reduced to NT$39.8 billion through the end of February," said Yeh. "This shows that the stock market has improved, and in order to improve management performance of the fund in the future, the Directorate General of Posts plans to entrust the fund to outside professionals, with related regulations likely to be completed within two months," Yeh said. According to regulations, the fund can only invest in the local stock market.

"In order to make sure that the [Postal Savings] Fund runs smoothly after it is entrusted to discretionary managed account [professionals], the NT$300 billion fund will, step by step, be managed by several companies," an official of the Directorate General of Posts further explained.

"The fund will evaluate qualified advisory companies, according to their capitalization, professional capability and past performance. Currently we are planning to entrust at least three advisory companies with NT$50 billion each to start. In the future, we shall increase the amount gradually, based on their actual performance."

According to one pundit, the move may mark a new direction for government fund management.

"This is the turning point for government fund management," said Liu Kai-pin (劉凱平), president of SinoPro Securities Investment Consulting (弘利投顧). "The securities advisory industry has been calling for the four government funds to entrust their funds to professionals, instead of being managed by civil servants with questionable professional capability," Liu said.

After the government deregulated the discretionary managed account service market at the end of last year, other government funds began to explore following suit.

"One of the merits of entrusting the fund to securities professionals, besides improving its management performance, is to eliminate political pressure from the administration to intervene in the local stock market in the future. By then, the ministers, including Yeh and Chen Chu (陳菊), chairwoman of Council of Labor Affairs (勞委會), who supervises Labor Pension Fund (勞退基金) and Labor Insurance Fund (勞保基金), could fend off pressure from the Executive Yuan by saying that all the money in the fund has been entrusted to professionals for the interest of the beneficiaries of the fund," Liu said.