pension funds

By Stuart Rae and John Lin, AllianceBernstein

Despite a slow start following its launch in November, the Shanghai-Hong Kong Stock Connect share trading scheme has significantly increased foreign access to China equities and created new investment opportunities. Two sub-sectors are particularly noteworthy for global investors; the food, beverage and tobacco segment and the household durables segment.

A key trend to watch in 2015 will be the likely increasing usage of Shanghai-Hong Kong Stock Connect. This important capital market reform was launched by the Chinese government last November to help increase the inflow of foreign capital to the Shanghai equity market, while also facilitating greater participation by mainland investors in Hong Kong-listed equities. Read more

Unhealthy lifestyles are spreading through emerging market (EM) economies as people adopt fast-food diets, work in stressful and sedentary jobs and contend with worsening pollution. These are unwelcome trends unless, perhaps, you happen to be an investor in EM healthcare stocks.

A proliferation in ailments, rising incomes and growing government support for healthcare in EM countries are bolstering the portfolios of Sectoral Asset Management, a fund company with about $3.5bn under management. In March this year, it publicly launched a fund invested solely in EM healthcare companies. Read more

By Tassos Stassopoulos, Alliance Bernstein

Rapidly ageing societies in developing countries represent important markets for consumer companies. However, it should be understood that vast cohorts of elderly people heading into the sunny uplands of their lives does not necessarily imply a bright future for investors.

It’s easy to overlook the ageing trend in emerging markets. Countries like India and China are home to the world’s youngest populations in terms of size. Yet as birth rates decline and healthcare improves, older people will constitute a growing percentage of the population. In the top 12 emerging markets, the over-65 demographic is growing at an annual rate of approximately 3.7 per cent (see chart) — nearly double the rate in developed countries. Read more

Are Nigeria’s pension funds ready to step up to the plate and help finance the country’s development? Policy makers hope they will grow out of their conservative approach of buying government paper and take advantage of recent changes designed to encourage them into new alternative asset classes, including private equity and infrastructure funds.

“Our pension funds are young,” says Olusegun Aganga, trade and industry minister. “We’ve not had them for a very long time so it is natural that there is a conservative way of looking at things.” But having built up a capital base of around $20bn (from $2bn in 2004), they are ready to do more, the minister hopes. Read more

Who’s bullish on America?

Mexican pension funds are. According to data from Consar, the government agency that oversees the country’s pension fund industry, Mexican pensions’ exposure to US equities are at an all-time high. Read more

How do we pay for her?

Poland plans to reduce the role private pension funds play in the country’s hybrid pension system in order to reduce public debt as it battles an economic slowdown.

Polish stocks on the main WIG20 index rebounded from a 10-month low after the opening of trading on Wednesday once the market realised the government was not intendig to nationalise pension fund assets, the biggest investor in the local equity market. Read more

They all cost money

South Korea’s state pension fund is entering riskier waters as it plans to allocate more funds to equities while reducing the weighting of bonds to boost investment returns.

Expansion into riskier assets has become inevitable for the National Pension Service to meet growing public pressure to boost its returns amid concerns that the fund could face a shortfall in coming decades with Korea one of the world’s fastest-ageing societies. The fund is targetting a 6.1 per cent annualised return over the next five years. Read more

A freighter at the Ponta da Madeira Maritime Terminal, owned by mining company Vale, in northern Brazil.©Bloomberg

As little as a year ago, Brazil’s greatest concern was the currency war – a tsunami of international funds that it believed was threatening to inundate its financial markets and those of other emerging countries.

Now, Brazilian real interest rates have fallen so low that, in a dramatic reversal, the country’s own pension funds are looking abroad. While their initial offshore investments will not amount to anything like a tsunami, it marks the start of what may prove to be an important step in the maturing of Brazil’s financial industry.

 Read more

Nursultan Nazarbayev has always taken pride in the privately-run pension system he introduced in the late 1990s that set Kazakhstan apart in the former Soviet Union as a pioneer of financial reform.

However, in a policy U-turn this week that has set investors worrying, the Kazakh president (pictured) has decided to nationalise the pension system and transfer the approximate $20bn of funds accumulated into the trusty hands of the central bank. While the details were not immediately clear, the move has triggered concerns among fund managers and their clients. Read more

Christmas has come early – for Chile’s Enersis.

Shareholders in the energy company have approved Chile’s biggest capital increase — a whopping sum of nearly $6bn (if you think that´s a lot, remember they were originally planning to seek $8bn).

It was not an easy path — Enersis battled pension funds, which are key investors in Chile, over the amount and minority shareholders baulked at the valuation of some of the assets that Spanish energy company Endesa said it would use to subscribe its share of the fundraising. Endesa, by the way, is owned by Enel of Italy. Read more

Intercorp, one of Peru’s largest lenders and retailers, is on a roll.

After a successful IPO launched in September for its retail wing, the company owned by Peru’s tycoon Carlos Rodríguez-Pastor has now received the green light from the Andean country’s regulator to create a private pension fund, AFP InteractivaRead more

Spain’s BBVA has agreed to sell its Mexican pension fund to local buyers for $1.6bn, the latest in a line of local asset sale by retreating Europeans.

Grupo Financiero Banorte, the only major bank that is Mexican-owned and Mexico’s Social Security Institute, known as IMSS, will share the cost for Afore Bancomer – as the pension fund unit is called – equally. Read more

Chile pioneered privatised pension funds in Latin America and the fund managers, known as AFPs, are now the country’s biggest institutional investors, with a juicy $159bn under management at the end of September, up 9.6 per cent on a year ago.

So perhaps it’s no surprise that the pension funds in Latin America’s best-managed economy are increasingly being seen as investment targets in themselves.

Chile’s fourth-biggest AFP, Cuprum, with some $32bn in assets under management, is the latest to catch the eye of a suitor. Principal Financial Group, a US insurer and asset manager which is expanding its footprint in Latin America, has agreed to buy Cuprum for $1.5bn. Read more

Pension calling

Colombia is not a country that figures high on the radar screen of most global firms when it comes to the asset management business. The country’s pension funds, with $66bn in assets under management, are tiny compared to the $311bn in the regional powerhouse that is Brazil.

But small can be beautiful. Just ask BlackRock. The world’s biggest money manager by assets is setting up shop in Colombia following the unexpected – but significant – success of a local exchange traded fund (ETF) it launched last year.  Read more

It’s not a licence to print money, exactly. But Argentina’s habit of shuffling dollars around the public sector to meet its financing needs certainly comes in handy for a government that has few ouside funding options.

Take this week, for example. While the nationalisation of Spanish-controlled oil company YPF was still hogging headlines, Argentina’s economy ministry tapped $3.1bn from the central bank and pensions agency, bringing to some $4.3bn the amount it has borrowed from state bodies so far this year, according to this reportRead more

Easier said than done. That is how investors view a pledge by South Korea’s state-run pension fund to raise its voice as the country’s biggest institutional investor, after it waved through the appointment of a convicted fraudster as chairman and co-chief executive of chip maker Hynix Semiconductor, in which the fund holds a 9.15 per cent stake. Read more