Wed, Mar 19, 2003 page10

• Investment managers drop the ball for labor insurance

  • By Kevin Chen / STAFF REPORTER
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  Several security-industry professionals that manage discretionary accounts for the government's Labor Insurance Fund (勞保基金) have reported negative double-digit return rates on their investment advice last year.

  They were originally employed to boost the return ratio of investments in the stock market.

  The Bureau of Labor Insurance under the Council of Labor Affairs, reported on its Web site recently that it has invested around NT$120 billion from the Labor Insurance Fund in the bourse so far.

  The total amount of the labor insurance fund was NT$497.19 billion as of the end of last year.

  To help pump new capital into the stock market, the bureau has entrusted nine fund companies through discretionary managed account services to manage around NT$30 billion since December 2001. The authorization allows these brokers to buy and sell securities on the bureau's behalf for a period of two years. In the past 12 months, the investment return rate was -16 percent, leaving only NT$24.96 billion in paper value as of the end of last year, the bureau said.

  President Investment Trust Corp (統一投信), which was charged with managing NT$5 billion in fund assets reported the worst portfolio performance -- a minus 22 percent return rate -- with NT$3.89 billion left on paper as of Dec. 31, the bureau said.

  According to the bureau, President Investment will be replaced by Fuh-Hwa Investment Trust Co (復華投信) and HSBC Asset Management Taiwan Ltd (匯豐中華投信) to manage the account.

  Fuh-Hwa, which runs a NT$2.5 billion discretionary account, reported -10.57 percent return rate as of Dec. 31, while HSBC which manages another NT$2.5 billion account reported a -12.71 percent return rate.

  "We misjudged the market late last year," a President Investment official said yesterday. "We were too late in building up our positions on traditional-industry shares when that sector performed well," the official, who declined to be named, said.

  Bureau of Labor Insurance Director General Liao Pi-ying (廖碧英) was unavailable for comment yesterday.

  But a bureau aide said that as of the end of last year, 17.86 percent of the fund was invested in domestic equities, 61.69 percent was deposited in financial institutions, and 1.11 percent in finance bills, with only 5.58 percent given to discretionary accounts. The remainder was sitting in bonds and beneficiary certificates, as well as loans, the aide said.

  A pundit blamed blurry economic development and inexperienced fund managers for the bleak investment performance.

  "The [discretionary account] services were aimed at transferring government responsibility for pursuing high returns on investments to private professionals," said Allen Chu (朱成志), chief executive officer of investment magazine Mabro Weekly. "But last year alone, the TAIEX dropped more than 15 percent."

  "The managers of these funds are often too young -- with most having only three to five years experience in fund management in Taiwan," Chu said. "Most have never managed a fund during war time."

  The other six fund companies which are entrusted to run the fund are JF Asset Management Taiwan Ltd (怡富投信) with -20.18 percent return rate, Capital Investment Trust Co (群益投信) with -13.11 percent rate, Fubon Securities Investment Trust Co (富邦投信) with -16.42 percent rate, Invesco Taiwan Ltd (景順投信) with -15.59 percent rate, Prudential Financial Securities Investment Trust Enterprise (保德信元富投信) with -22.81 percent rate, and Prudential Securities Investment Trust Co (保誠投信) with -16.96 percent rate.
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