Brokers to manage pension fund

The Labor Pension Fund has tentatively decided to allow outside investment professionals to manage 5 percent of its funds, officials of the Council of Labor Affairs said yesterday.

"We are planning to provide 5 percent, or NT$12 billion, of our NT$240 billion fund to outside managers through discretionary managed accounts," said Chen Sheng-shien (陳伸賢), a director at the Council of Labor Affairs, yesterday at the Asset Management Seminar held in Taipei.

The council is responsible for the management of the Labor Pension Fund.

Just last month, the Civil Servant Retirement and Pension Fund also allowed outside brokers to manage part of its fund.

"A total of NT$12.2 billion has been given to nine fund companies through discretionary managed account services since July 16, and the rate of return was 5.6 percent as of Monday," said Wu Rong-Ming (吳容明), Minister of Civil Service, in the seminar. The Ministry of Civil Service is the regulatory agency of the Civil Servant Retirement and Pension Fund.

The Civil Servant Fund manages pensions for 600,000 civil servants, public school teachers and military soldiers. Currently, 39 percent of the fund is invested in domestic equities, 33 percent in finance bills and19 percent is deposited in financial institutions. The remainder is sitting in bonds and beneficiary certificates, according to Wu.

"The total assets of the [Civil Servant Retirement] fund is currently NT$186 billion. Compared with about NT$10 billion in July 1995, when the fund was established, the fund size has grown more than ten-fold," said Wu. "In the past six years, the realized return of the fund was NT$39.2 billion, or an 8.46 percent rate of return. This is much higher than the 5.86 percent rate of return stipulated by the government," Wu stressed.

"In order to further protect the interests of fund beneficiaries, we have decided to allow outside fund managers to have access to part of the fund. In the last month a total of nine local fund companies, including Chase Fleming Securities Investment Trust Co (怡富投信) and President Securities Investment Trust Corp (統一投信), have been awarded a total of NT$15 billion through discretionary accounts. A total of NT$12.2 billion has been passed to the fund companies so far.

"Although it's only three weeks after we made the fund available to outside managers, and 49 percent of the money has been put into the local stock market [others have been invested in finance bills, bonds and bank deposits], the net rate of return on investment was 5.6 percent," Wu said.

"We are planning to open up the fund even more to outside managers, including foreign financial institutions, as the system matures," Wu said.

Other government funds have similar plans.

Currently, the most the Labor Pension Fund can invest in stock market is 30 percent of the fund assets. If outsiders are give 5 percent, one-sixth of the maximum amount the fund can invest would be managed by outsider managers. Currently, the fund has 25 percent of its money invested in local equities, 27 percent is borrowed by state-owned companies and 47 percent is deposited at local banks.

The government funds also plan to invest in overseas markets in the future.

"The Supervisory Committee of the Labor Pension Fund agreed in July that [part of the fund] would be invested in overseas markets. As to the ceiling for overseas investment, the Supervisory Committee is going to discuss next month how much of the fund can be invested overseas," said Chen Chu (陳菊), chairwoman of the Council of Labor Affairs.