A move by China's Guangdong Province to transfer a 100 billion yuan ($15.8 billion) portfolio to the country's National Council for Social Security Fund is paving the way for more external managers — possibly including non-local firms — to run some of the 1.9 trillion yuan in public pension assets, consultants and managers said.
The two-year contract between Guangdong Province and the 869 billion yuan Beijing-based pension fund is “a trailblazer,” said Michael McCormack, executive director at consultant Z-Ben Advisors, Shanghai. “It's definitely a step in the right direction” for China's pension system.
“This is good news for domestic managers, and potentially good news for international managers,” said Stuart Leckie, chairman of Stirling Finance Ltd., a research and consulting firm based in Hong Kong.
The NCSSF is planning to ask about 18 mostly local managers to submit proposals to manage what is likely to be domestic fixed-income and equities strategies, according to Mr. McCormack.
Within this group, several joint ventures between global and local managers in China could bid for domestic mandates, including: Harvest Fund Management Co. Ltd., co-owned by Deutsche Asset Management; Guotai Junan Allianz Fund Management, Allianz SE's joint venture with Guotai Asset Management Co. Ltd.; and Haitong Investment Management Co. Ltd., Beijing, owned by Haitong Securities Co. Ltd. and BNP Paribas Investment Partners.
As the local pension fund portfolios mature, at least a small allocation to overseas investments will be needed for diversification, sources said. As of December 2011, global managers who already manage assets for the NCSSF and could benefit in the future include: BlackRock Inc., State Street Global Advisors, T. Rowe Price Group Inc., Pacific Investment Management Co., BNY Mellon Corp., Morgan Stanley Investment Management and Wellington Management Co.
“Even if international managers initially gain only a tiny mandate with low fees, the fact that you're managing money for the NCSSF should mean that the mandate will grow over several decades, provided performance is good.” Mr. Leckie said.