NSSF set to name managers for US$1b offshore funds
Appointment of 10 global companies will pave way for national pension fund to buy stocks overseas
China's National Social Security Fund (NSSF) will pick 10 fund managers to manage a combined US$1 billion in five offshore funds 'very soon', sources said.
The naming of the firms has been delayed by negotiations over the exact terms of the fund management agreements but will happen before the end of the year, the sources added.
Barclays Global Investors, State Street Global Advisors, Blackrock, Pimco and Templeton were all previously reported to be among those short-listed to act separately as offshore managers for funds dedicated to international stocks outside the United States, US equities, Hong Kong shares, international fixed-income securities and a cash management fund.
Given the relatively small amount of funds involved, the scheme is 'irrelevant to the Hong Kong market', said Vincent Chan, the head of China research at Credit Suisse.
But the appointment of fund managers is nevertheless significant since it will for the first time allow the NSSF to buy offshore shares.
And ultimately the funds under management will expand sixfold, since government regulations permit the fund to invest as much as 20 per cent of its total assets internationally.
At present, the fund has about 250 billion yuan in assets.
The pension fund is already one of the biggest institutional investors in Hong Kong - thanks to its considerable holdings in Hong Kong-listed mainland companies acquired under rules requiring all state-owned companies selling shares overseas to transfer 10 per cent of their initial public offerings to the fund.
'The NSSF has participated in every single recent overseas [initial public offering] by a state company,' said Steven Sun, a regional equity strategist at HSBC.
The fund sold the stock of both China BlueChemical and China Merchants Bank on their first trading days in late September, although sources said it could buy back some of these shares once it has named fund managers.
Partly due to its sales of H shares, the fund has earned about 13 billion yuan so far this year, a return of just over 5 per cent, with more than half of that coming from its stock investments in the bull market.
The NSSF was established in 2000 as a back-up to the woefully underfunded regional and provincial pension funds.
About 15 per cent of China's 1.3 billion people are expected to be older than the retirement age of 60 by the end of the next decade, a trend exacerbated by the one-child policy adopted in the late 1970s to slow population growth.
Government rules require the fund to keep at least 50 per cent of its investments in bank deposits and treasury bonds, at least 10 per cent in corporate and other bonds and up to 40 per cent in securities investment funds and stocks.
Annual service fees collected by investment managers cannot exceed 1.5 per cent of the net value of NSSF funds under management.
