HSBC wins Chunghwa Telecom funds mandate

The Taiwanese company makes its first international investment outsourcing.
Chunghwa Telecom, the biggest telecommunications company in Taiwan, has awarded its inaugural overseas investment mandate to HSBC Investments, according to market participants.

The company, which used to be state-owned, is following in the footsteps of public pension funds in Taiwan by experimenting with overseas institutional mandates, in this case for its corporate war chest.

It only handed out a single $100 million, global-balanced mandate, said to be on an absolute-return basis. Only fund houses with an onshore presence were invited to bid for the business; reportedly there were six others competing for it.

The public pension funds in Taiwan have also become keen on absolute-return mandates; the Bureau of Labour Insurance attempted such an outsourcing earlier this year but killed the effort when it realised this would involve derivatives; and just this month, the Public Service Pension Fund has awarded $600 million to three firms willing to attempt absolute returns despite their inability to use derivatives aside from strict hedging purposes.

Whereas the public pension funds are demanding high returns, Chunghwa PostÆs requirements are reportedly more palatable: three-month US Libor plus 200 basis points. But, also like the public funds, Chunghwa Telecom is reportedly imposing requirements such as onerous reporting should the portfolio suffer losses any given month.
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