Taiwan’s Labor Pension Fund has selected investment managers to run its first global listed real estate portfolio.
The retirement fund – the older of Taiwan’s major pension funds – will invest $200m (€145m) in listed property and a further $200m in listed infrastructure securities, The Bureau of Labor Funds confirmed.
The fund managers will be announced one month after the capital has been allocated, following “careful evaluation” of market conditions, according to Chao-Hsi Huang, director general of Bureau of Labor Funds.
The FTSE EPRA/NAREIT Developed Index and the UBS Global 50/50 Infrastructure & Utilities Indexwill be used as benchmarks for the two allocations.
The move to invest in global real estate securities comes two years after the $200bn Labor Pension Fund decided to invest in global infrastructure securities for the first time.
In March 2012, the fund allocated $1.25bn in infrastructure investments to Invesco, Cohen & Steers, and EII Capital Management. The investment has so far registered a 23.1% return, with the portfolio now having a current market value of $1.46bn.
Leo Lee, Bureau of Labor Funds director of foreign investment, said the performance had encouraged the fund to invest in assets other than equities and fixed income.
Since the bureau has no plans to invest in hedge funds, much of that increase will go into international real estate and infrastructure, he said. Although allowed to invest in domestic real estate, the fund has a small Taiwanese real estate portfolio of $60m.
With the new labour pension fund’s size and large net inflow of funds, Lee said: “Our goal is to raise our investment in alternative assets – there is room to increase in real estate and infrastructure.”
Lee added that the Labor Pension Fund – which as of the first quarter of this year had a total asset size of $371bn – is likely to invest between 1% and 2% of its asset size in overseas real estate and infrastructure.
Real estate currently accounts for about 6% of the total portfolio, far lower than the 20% ratio of alternatives in European and US pension funds.
In a separate interview with IPE, Grace Lee, chairman of the ROC Pension Fund Association, said the bureau should gradually increase the ratio of alternative assets to improve return on investment and remedy Taiwan’s growing capital shortfall.
Taiwan’s Labor Pension Fund is divided into the old Labor Retirement Fund and the new Labor Pension Fund, which together has a combined size of $571m.
The bureau also manages $850bn in five other labour and employment and pension schemes, which it expects to grow by around $7bn per year. It currently invests 60% in fixed income and 40% in equities and other assets. It is yet to mandate hedge funds, though it has a small exposure to them through its internally managed fund-of-fund programme, the bureau said.
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