GLOBAL - China's National Council for Social Security Fund (NCSSF) has awarded a global REIT mandate to Australian fund manager AMP Capital.
It is the first formal mandate that the RMB869bn (€111bn) sovereign fund has awarded to AMP, although both parties have been building a relationship in recent years.
Established in 2001, the NCSSF was been prohibited from investing overseas until 2006. Having appointed its first global equities, fixed income and regional mandates, it is now targeting global REITs as a liquid, tax-efficient proxy for the global real estate market.
Anthony Fasso, international business director at AMP Capital, said: "The NCSSF has reached out to managers to develop its expertise in global investment. They want to learn about pensions and to evolve towards the international market."
The mandate will seek to outperform the EPRA benchmark, with 32% allocated to Asia, 14% to Europe and the balance to North American markets. London-based senior portfolio manager Tom Walker said AMP could overweight within the regions. "We'll pick the best markets wherever they may be," he said.
Fasso said Chinese sovereign institutions - including not only NCSSF but China Investment Corporation (CIC) and the State Administration of Foreign Exchange (SAFE) - now already fully exposed to local asset classes, were beginning to diversify geographically.
"The pension system in China is already big and it's growing at a rapid rate. This is a trend you'll see a lot more of - first from sovereigns, then from insurers," said Fasso.
Fasso expects restrictions to be lifted on insurers investing overseas within two years. AMP's parent group signed a cooperation agreement with China Life Insurance, the country's largest insurer, in 2009.
The NCSSF is under pressure to improve its performance after posting returns of RMB7.34bn for 2011. More than 50% of the fund's assets are fixed income holdings, with 32.3% in equities and 16.3% in ‘industrial investment'.
Last month, the fund announced that it would increase its investment in domestic private equity funds by 50% to RMB30bn this year.
The official Chinese news agency has reported that securities regulator the China Securities Regulatory Commission was considering introducing tax breaks for pension funds investing in equities in order closer to match assets under management with liabilities.