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  #291  
Old 06-13-2018, 06:13 AM
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Mary Pat Campbell
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JAPAN
ASSET MANAGEMENT

https://www.bloomberg.com/view/artic...-what-you-kill

Quote:
$1.5 Trillion Says: Eat What You Kill
One pension plan sends a shock wave round the fund management industry.


Spoiler:
With 160 trillion yen ($1.5 trillion) to invest, Japan's Government Pension Investment Fund has an awful lot of clout. Its latest innovation is to oblige many of the outside firms that manage its money to eat what they kill rather than enjoy a free lunch from simply gathering assets. And where the world's biggest pension fund leads, the rest of the money-management industry looks bound to follow.

Less than three months after serving notice of a forthcoming change to how it remunerates its external partners, the fund this week revealed its new performance-based payment structure.

The pension fund says it doesn't need active managers to fulfill its obligations. “GPIF is basically able to meet its investment targets for pension funding through passive management alone,” it says. So the only reason to employ active managers, who currently oversee about 20 percent of the fund’s assets, is if they can effectively guarantee to deliver better returns than an index tracker.

As an incentive to generate that alpha, there'll be no limit on how much a manager can earn by outperforming. That's a groundbreaking development. But, at the same time, the base fee active managers get for looking after some of the pension fund’s assets will be cut to the “extremely low” level that GPIF, thanks to its sheer size, is able to squeeze from its passive portfolio.

Domestic Dominance
Japan's pension fund has more than half of its capital in domestic assets


Source: GPIF (Figures are for end of 2017)

Shifting to the new structure is the pension fund's attempt to address a problem that's plagued fund management for years: fund managers are rewarded for simply gathering assets rather than making returns. GPIF says that the old model gave firms "little incentive to set target excess return rates appropriately, to be innovative in seeking excess returns, and to control their management capacity." Only a handful of the external firms given money by the fund beat their targets.

Positive Contribution
Japan's pension fund has generated positive returns for six consecutive quarters


Source: GPIF

In an effort to align strategies with its long-term outlook, the fund will split performance-based fee payments, with 45 percent paid in the year they were earned and 55 percent delayed to the following year. And to avoid the short-termism that asset managers complain undermines performance when an investor withdraws cash after a short run of bad results, the pension fund is signing what it calls "multi-year contracts" with some of its chosen managers. It didn't specify how long those mandates will run for.

The fund, rightly, recognizes that its plan will have a big impact on the wider industry. GPF says it sees active managers playing an important role in the "day-to-day effort to improve market efficiency," which it says helps to augment the potential performance of its passive strategies. That's a sensible approach to the active-versus-passive debate, which can too often deteriorate into scaremongering.

Allowing asset managers to share in both the upside and the downside of their alleged investment expertise gives them more skin in the game. It should lead to some much-needed Darwinism, where only the fittest survive — and the fund management world will be healthier as a result.


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  #292  
Old 06-13-2018, 07:50 AM
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Mary Pat Campbell
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CANADA
https://www.ai-cio.com/news/canada-p...e-green-bonds/

Quote:
Canada Pension Plan Investment Board to Issue Green Bonds
The ESG-related securities will contribute to the fund’s $2.3 billion renewable energy investment plans.


Spoiler:
Canada’s largest pension fund is about to issue its first green bond, which will provide additional funding for its eco-friendly energy investments.

Based in Toronto, the $356 billion Canada Pension Plan Investment Board ((CPPIB) is planning to invest more than $2.3 billion in the renewable energy sector, in line with the low-carbon initiative many institutional investors are participating in. The fund says it is the first pension program to issue this type of bond.

Green bonds support environmental, social, and governance (ESG) projects, such as climate change-related investments. ESG bonds are tax exempt and can also provide tax credits. To qualify for “green” status, the bonds must be verified by a third party, such as the Climate Bond Standard Board. The Canada pension plan is working with the Center for International Climate Research for second opinions on green bond qualifications.

Green bonds have been around since 2007, and have risen in popularity with the increase in environmental awareness campaigns.

The Canadian pension board will invest green bond proceeds into renewable energy, sustainable water and wastewater management, and green buildings (designed and constructed around preserving our natural environment).

The board invests on behalf of the Canada Pension Plan, which covers some 20 million contributing workers and beneficiaries.

Poul Winslow, the fund’s senior managing director and global head of capital markets and factor investing, called the green bond issuance “a logical next step to [the] CPPIB’s investment-focused approach to climate change,” adding that the capital raised will help support the fund and its future success.

All Canadian green bonds will be issued on a private placement basis. The investment board did not specify when it will begin the issuance of the bonds.


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  #293  
Old 06-17-2018, 04:50 PM
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CHINA

https://www.caixinglobal.com/2018-06...101271104.html

Quote:
China to Take From the Pension Rich, Give to the Pension Poor

Spoiler:
China has decided to pull money from provincial-level pension funds to create a national pool to address growing pension deficits in poorer regions.

The arrangement will allow the central government to take a set amount of money from pension funds currently managed by provinces, municipalities and autonomous regions, and redistribute it to those with pension fund shortfalls, the central government said in a notice published Wednesday on its website.

The central government said this centrally controlled pool will balance the pension-fund burdens across the country and strengthen the overall pension system.


The change comes at a time when China is facing a looming demographic crisis because of its rapidly aging population and alarmingly low birth rate. At the end of 2017, China had 241 million people over the age of 60, who accounted for 17.3% of the country’s 1.4 billion population, according to the official Xinhua News Agency.

Generally, a population is considered to be aging when 10% of its population is over 60.

The number of newborns in China fell by 3.5% in 2017 to 17.23 million, despite the end of the one-child policy.

In 2017, China’s pension funds collected 3.3 trillion yuan ($515 billion) and handed out 2.9 trillion yuan in payments. As of the end of last year, the funds had an aggregate surplus of 4.1 trillion yuan. However, two-thirds of the surplus belonged to seven provincial-level areas, including Guangdong and Beijing.

The central fund will allow the government to create a pool from the pension surpluses of richer provincial-level areas to ensure that the poor regions can meet their pension obligations. If a local government failed to meet these obligations, it would be a big problem because so many retirees depend heavily on government pensions to survive.

Currently, provincial-level governments each fund their own pension funds by taxing workers’ wages. Some regions, such as Heilongjiang province, in China’s northeastern rust belt, are running pension deficits due to declining contributions from a net outflow of young workers who are frustrated by an ailing local economy.

Although every provincial-level area will have to contribute to the new fund, some will receive more than they contribute, You Jun, vice minister of Human Resources and Social Security of China, was cited by the Beijing News as saying.

The new fund will be able to collect around 400 billion yuan a year, according to Caixin’s calculation based on official data about the weighted average salary of urban workers.


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  #294  
Old 06-19-2018, 11:48 AM
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Mary Pat Campbell
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CHINA

https://www.ai-cio.com/news/china-sh...pension-plans/

Quote:
China to Shunt More Money to Ailing Provincial Pension Plans
Beijing will divert money from well-funded programs in bustling urban centers to subsidize struggling areas.
Spoiler:
The Chinese government will help out provinces reeling under the weight of increasing pensions burdens, by tapping retirement funds of more well-off provinces.

The goal of the new system is to keep the country’s basic pension system stable, amid an aging population that is swelling the benefit rolls and a migration of working-age people to urban areas. This exodus leaves more rural locales with fewer taxpaying citizens to fund the pension payouts.

Under the plan, at least 3% will be withdrawn from the better-funded plans and increase from there.

China’s government also wants more pension data tools, such as a search platform to check individual benefit payments, a watchdog for central pension fund adjustments, and a nationwide central database.

No increases are expected to be made to contributions from workers or companies.
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