From page 16, Money & Investment, issue 385, Sept 15, 2008
Translated by Zuo Maohong
Original article:
[Chinese]
Around eight global asset management firms have been picked by China's pension fund – National Council for Social Security Fund (NSSF) – as potential managers to look after its overseas investment portfolios.
A source close to the NSSF told the EO that the list of companies was finalized after a meeting in Shenzhen in late August, and they were engaged in detailed negotiations currently. However, the Fund's media spokesperson denied any knowledge of it.
In late August, officials from the NSSF's investment department and dozens of international financial institutions gathered in Shenzhen.
Sources who were present told the EO that after the meeting, the Fund decided on eight potential managers for its oversea investments. Among the short listed included US-based Goldman Sachs and France-based BNP Paribas, said one source who was also a bidder.
The bid invitation was announced four months ago on May 23, the 64-billion-dollar-strong (by 2007 year-end) Fund was sourcing for firms, with at least six years of experience and that overseeing at least five billion dollars worth of assets, to manage its investments in the global equity markets.
Each bidder could not bid for more than two of the five-type of markets - MSCI China Index, MSCI Asia Pacific ex-Japan Index, MSCI Emerging Index, MSCI Europe Index, and MSCI World Index - opened for race.
According to a source, by the application closing date on June 18, over 100 companies had sumitted their bids. Preliminary assessment was carried out in early July and by the end of the month, the Fund had finished interviewing short listed candidates and narrowed down to about 20 companies for the above-mentioned Shenzhen Meet.
One foreign banker claimed the NSSF did not provide clear explanation on its investment focus when inviting for bids, thus many bidding companies failed to deliver or exert their advantages through targeted strategies.
Risk control and investment ability were two decisive factors in bidding, said a fund manager specializing in oversea investment.
A source close to the NSSF said this was understandable, since stability was a major characteristic of pension fund, and the current global market wasn't prospering. The EO learned that this year's bidding process was relatively low-key compared with the Fund's first exercise to pick global managers two years ago.
"Last time, the Fund publicized all the documents, rules, requirements and how the whole thing progressed. But this time the process wasn't transparent at all. There wasn't timely and accurate information," said one bidder.
In March 2006, the Ministry of Finance and the Ministry of Labor and Social Securities jointly issued a guideline that initiated the Fund's investment strategies abroad. In May that year, the Fund appointed the first batch of global managers to look after investment in stocks, bonds, and foreign exchanges. By far, 12 asset management firms and two banks have been entrusted with the task by the NSSF.
Some market observers and financial scholars thus suggested that NSSF could be deemed as a sovereign wealth fund (SWF), a state-backed investment machine to boost returns and savings for future generations, though usually in the context of China, the term referred to China Investment Corporation (CIC) set up last year.
