China pension fund to award overseas mandates
BEIJING Thu May 22, 2008 5:59pm IST

May 22 (Reuters) - China's national pension fund is inviting external investment companies to bid for mandates to manage an undisclosed amount of money in five different equity asset classes.

The National Social Security Fund (NSSF) said it wanted overseas investors with at least six years of experience and $5.0 billion of assets to invest in the following five products:

-- Overseas Chinese stocks benchmarked to the MSCI China Index

-- Asia Pacific (ex-Japan) stocks benchmarked to the MSCI All Country Asia Pacific ex-Japan Index

-- Emerging markets stocks benchmarked to the MSCI Emerging Market Index

-- European stocks benchmarked to the MSCI Europe Index

-- Global stocks benchmarked to the MSCI World Index

NSSF, a central-government safety net for China's patchwork of badly underfunded provincial pension schemes, awarded mandates to foreign fund managers in late 2006 for more than $1 billion of investments in stocks and fixed-income products.

There was no mention of bonds this time, leaving open the question of whether it was adopting a more aggressive investment strategy. NSSF recently won approval to invest 10 percent of its assets in private equity, according to Chinese press reports.

NSSF was worth 516.2 billion yuan at the end of 2007. It is allowed to invest up to 20 percent of these assets overseas.

Its foreign investments totalled $1.66 billion at the end of last year -- small change by global fund industry standards and a fraction of the roughly $90 billion that China's sovereign wealth fund has earmarked for investment abroad.

Dai Xianglong, NSSF's new chairman, said in February that NSSF would focus investments on its home market because of the many good opportunities in China and continued yuan appreciation.

When NSSF first invited foreign fund managers in 2006, some 84 firms from around the world competed for the prestigious mandates in the hope of winning future business.

Ultimately, NSSF selected ten: Allianz, Invesco and UBS for Hong Kong stocks; Alliance Bernstein, AXA Rosenberg and State Street Global Advisors for non-U.S. stocks; Janus Intech and T.Rowe Price for U.S. stocks; and Alliance Bernstein, BlackRock and PIMCO for fixed-income products.

The World Bank has estimated that China has promised pensioners $1.6 trillion more than it has set aside.

NSSF's statement on Thursday was published on its website (www.ssf.gov.cn).

(Reporting by Zhou Xin and Simon Rabinovitch)