www.fund.gov.tw/public/Attachment/910615353865

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Nov 18, 2013 (3 years and 8 months ago)

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Part of Fleming Asset Management


u
v

Managing Pension Assets
Worldwide


Alice Ho, Investment Director


Global Portfolios Group
-

Hong Kong


22 September 2000


Investment Approach


Operations & Administration



Part of Fleming Asset Management


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1

Managing Pension Assets Worldwide

Recent Trends


Deregulation,

privatisation,

reform

and

enhanced

coverage

will

continue


Pension

Fund

assets

-

larger

in

size

and

more

specialisation


Accountability

and

responsibility

-

formal

channels

for

evaluation


Unique

pension

needs

/

characteristics

-

different

risk

/

return

profiles


Performance

measurement

-

set

standards

/

customised

benchmarks


Search

for

quality

investment

services

-

clear

&

lucid

investment

philos
0
phy




Part of Fleming Asset Management


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2

0
20
40
60
80
100
0
5
10
15
20
25
Years
$
$29.53

Value of $100 with 5% inflation

Preserving and Growing Real Value of Assets



After 25 years, the value of $100 today is only worth $29.53 then.



The law of diminishing return.



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Equities, Bonds and Inflation


Equities are the best hedge against inflation
...

... hence long
-
term preference



Source: CSFB UK Equity
-
Gilt Study
-

January 1999

'18

'22

'26

'30

'34

'38

'42

'46

'50

'54

'58

'62

'66

'70

'74

'78

'82

'86

'90

'94

'98

$10

$100

$1,000

$10,000

$100,000

$1,000,000

Equities

Bonds

Retail Prices



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Managing Government Assets



Key Building Blocks


Looking at history as a reference


long term

0
5
10
15
20
25
0
10
20
30
40
50
Annualised Return (US$)
Annualised Standard Deviation (%)
Hong Kong
Japan
Australia
Singapore
Europe
US
World
Taiwan
US CPI
US Gov't Bonds
Equities
Bonds
CPI
Taiwan CPI*
Risk / Return Profile
-

Selected Assets From January 1970 to December 1999

*
Local Currency



Part of Fleming Asset Management


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Estimated Value of Pension Fund Assets
(US$bn)


Pension

assets

in

major

markets

increased

by

more

than

50
%

from

1993

to

1998


The

U
.
S
.

institutional

market

remains

the

largest

in

the

world

at

about

57
%

of

total

21
46
77
172
205
350
470
585
1,159
2,285
7,400
0
2,000
4,000
6,000
8,000
10,000
Hong Kong
Ireland
France
Germany
Australia
Switzerland
Netherlands
Canada
UK
Japan
United States
Source: Watson Wyatt



Part of Fleming Asset Management


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United States

47

66

Japan

45

55

Netherlands

25

39

Germany

4

13

Switzerland

16

18

Canada

46

52

Ireland

62

64

Australia

51

53

UK

72

70

Hong Kong

70

62



End of 1993 (%)


Equity proportion is growing rapidly


Seems to be capped around 70% in mature markets

End of 1998 (%)

Source: Watson Wyatt

Equities as a Proportion of Institutional
Pension Fund Assets



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Hong Kong

44

45

Netherlands

16

23

Canada

15

16

Japan

8

19

United States

5

11

Germany

1

6

End of 1993 (%)


Growing willingness to invest in foreign assets


Growth has typically been constrained by local
governments who are now liberalising

End of 1998 (%)

Source: Watson Wyatt

Foreign Equities as a Proportion of Total Equities



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Pension Fund Assets

Assets Managed by External Managers


Increasing propensity to outsource to external
specialists

26%
30%
42%
46%
62%
73%
87%
89%
91%
94%
100%
0%
20%
40%
60%
80%
100%
Germany
Japan
Switzerland
Netherlands
Canada
Australia
United States
UK
Ireland
Hong Kong
France
End of 1998

Source: Watson Wyatt



Part of Fleming Asset Management


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Japan
France
Irel and
Hong Kong
Germany
Switzerl and
UK
Austral ia
Netherl ands
Canada
United States
Source: Watson Wyatt

Small Scale

Large Scale

Level of Internal Resources in Pension
Investment Matters



The needs to outsource to external specialists has much to do with the


degree/level of internal resources in pension investment.



Part of Fleming Asset Management


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France
Japan
Germany
Netherl ands
Hong Kong
United States
Switzerl and
Irel and
Austral ia
Canada
UK
Source: Watson Wyatt

Small Scale

Large Scale

*
Green area represents global consultants influence, and yellow relates to domestic consultant sway.

Extent of Influence Exercised by
Investment Consultants*



The lower the level of internal resources in pension investment the


higher the extent of influence exercised by global consultants.



Part of Fleming Asset Management


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1998

%
of Assets

1%
5%
7%
8%
24%
25%
41%
50%
61%
0%
0%
0%
10%
20%
30%
40%
50%
60%
70%
Japan
Germany
Netherl ands
UK
Irel and
Canada
United States
France
Hong Kong
Switzerl and
Austral ia
Source: Watson Wyatt

Self
-
Administered Occupational Funds
Using a Defined Contribution Arrangement



Part of Fleming Asset Management


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Managing Pension Assets



Investment Manager Structure


Single manager


Multiple managers


Specialists


Generalists


style


risk profile


investment approach


Mixed


internal / external


specialist / generalist


Understanding the client’s needs



Part of Fleming Asset Management


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Managing Pension Assets

Factors to Consider




Setting long term strategic policy

Objectives

Growth



Meet pension liabilities



Time Horizon

Long (how long)



Unique Needs

Regulatory requirements


Distribution / cash needs


Tax considerations




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Key to success


communicate and review

Setting Investment Guidelines and Benchmark Indices

Managing Pension Assets


Agreeing

on

performance

measurement

yardsticks


Defining

risk

tolerance

in

qualitative

and

quantitative

terms

whenever

possible


Use

a

clear

and

easy
-
to
-
follow

format

on

investment

guidelines

and

restrictions


Setting

review

schedules



Part of Fleming Asset Management


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Fleming Asset Management Worldwide

Global Reach






Global reach


The Americas

New York

16

Rio de Janeiro

10


Europe, Africa and

the Middle East


London

96

Moscow

2

Prague

3

Cairo

5

Cape Town/
Johannesburg

7

Gaborone

1

Harare

2



Asia Pacific

Tokyo 14

Taipei 18

Hong Kong 21

Mumbai 2

Bangkok 4

Singapore 3

Melbourne 5

209
investment professionals



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Fleming Asset Management

Fleming Asset Management

European Assets

London

Global Assets

London

Asian Assets

Hong Kong

US Assets

New York

Japanese Assets

Tokyo



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Need

to

have

investment

professionals

in

local

markets

to

understand

local

issues

and

be

close

to

companies



Choosing

the

best

stocks

is

the

best

way

of

adding

value

in

the

long

term


Need

to

view

the

forces

acting

on

stocks

and

markets

in

a

global

context

Adding Value
-

The Chase Fleming
Approach



Part of Fleming Asset Management


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The Global Portfolios Group

15%
21%
17%
47%
Investment Trusts
Global Segregated
Unit Trusts
Pension Funds

194
clients in 12 countries, 159 benchmarks


$17 billion under management as at 30 June 2000


$11 billion managed via integrated global approach



Product range tailored to clients’ specific objectives




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Global Portfolios Group


One team managing all global portfolios

London


15 Investment

Professionals

Hong Kong


6 Investment

Professionals

Tokyo


3 Investment

Professionals

Global Portfolios Group

US$17bn under management



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Global Portfolios Group

Team Members



Investment Professionals

Primary Responsibilities


Years Industry Experience

Peter Harrison

Head of Desk; Chair, Portfolio Review Group

12

Howard Williams

Chair, Model Portfolio Group

18

James Fisher

EAFE Mandates

15

Ian Henderson

Specialist Global Sector Funds

23

Jonathan Lowe**

HK Pension Fund Mandates

18

David Atkinson*

Kokusai Mandates / Chairman Sector and Themes

13

Sandeep Bhargava

Fund Manager / Analyst

6

Peter Warnes**

Fund Manager / Analyst

11

Simon O’Sullivan

Fund Manager / Analyst

6

Shoichi Mizusawa*

Fund Manager / Analyst

3

Tai Nakagawa*

Fund Manager / Analyst

10

Hugo Alexander

Fund Manager / Analyst

3

Che Chow

Fund Manager / Analyst

6

Edward Walker

Analyst

3

Tanya Clarke

Analyst

2

Roger Bacon

Analyst

7

Shane Duffy

Analyst

1

Tom Murray

Analyst

4

Anna Yeung**

Implementation

2

John Felicite

Implementation

7

Rob Lay

Global Product Manager

11

Alice Ho**

Investment Director / Client Service Director

14

Betty Au**

Client Service

14

Kwenny Sung**

Client Service

7

Gayda Humphries

New Business Service Support

6


*based in Tokyo ** Based in Hong Kong



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Global Portfolios Group

Investment Process


Highlights


Process

designed

to

satisfy

most

rigorous

institutional

clients


Stock

selection

is

key

source

of

added

value


Use

best

ideas

from

the

regional

specialist

teams


Construct

portfolios

globally

not

as

regional

‘silos’


Use

global

sector

analysts

and

quantitative

techniques

to

ensure

optional

global

industry

exposures


Clear

focus

on

risk

control

and

consistent

incremental

outperformance



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GPG’s Investment Process

The coming together of key inputs


All clients’ funds consistent with model portfolio

Tailor Made Client Portfolio

Model Portfolios

Model Portfolio Group/ Optimisation

MSCI

EAFE

Model

MSCI

World

Model

MSCI

Kokusai

Model

Hong

Kong

Model



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Our Research Process


A clean, disciplined and systematic

process to asses growth and quality

Macroeconomic factors

Themes

Sectorial implications

Value

EPS Revisions

Price momentum

Business characteristics

Financial characteristics

Management factors

Stocks ranked 1
-
5

(
strong buy
-

strong sell)

Quantitative

Thematic

Fundamental

Research



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Global Portfolios Group

Defining Characteristics


Our portfolios own stocks which have the following
characteristics


improving returns


inherent volume growth


good business model


improving ROE/ROC


attractive valuations


Process and philosophy aligned



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GPG’s Research Function

Global Sector Research

Global

Sector Research

Regional analysts

(stock rankings)

Model Portfolio Group

Basic Industries

Technology / Telecoms

Financials

Industrials

Consumer Staples

Consumer Discretionary


Global industry comparisons: not primary research


Global valuation comparisons
-

best in industry globally

Research



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Thematic Research


Provides macro
-
economic input needed


Key investment themes identified and their implications for
each market sector analysed


Current themes include


digitalisation


disintermediation


globalisation


intermediary pricing environment


To ensure consistency with long
-
term economic

and strategic views

Themes



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Asset Allocation
-

Inputs

Global

Regional

Value

Quality

Momentum

Fund flows

Valuation

Earnings revisions

Economic forecast & revisions

Politics/sentiment

Asset class

rankings

aggressively overweight
-

aggressively underweight


Fundamental

Thematic

Quantitative

Asset
Allocation


Based on rate of change analysis


Identify major turning points in markets: not short
-
term tactical



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Asset Allocation
-

Information Flows

Output from quant
model (monthly)

Asset Allocation

Team

Regional
Specialists

Global Group and
Distribution
Businesses

Quant

Team

Fixed Income &

Currency Team

Medium term bond and
currency forecasts

(quarterly)

Economic Analysis

Interpretation of economic inputs
and fundamental drivers
(quarterly)

Market updates (monthly)

Asset preferences matrix

Regional analysis/minutes

“House View” presentation

Thematic views



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Portfolio

Construction

Asset

Allocation

Sector

Analysis

Security

Selection

Risk

Control

Global Portfolios Group

Investment Process
-

The Key Steps



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Portfolio Construction Process

Levels of Risk

1.

Economic and
financial risk


Real risk lies in the companies
we own


Investment process delivers


rigorously researched
stock ideas


global thematics


stock screening model










2.

Benchmark risk
(portfolio)



Statistical controls


tracking error

i.

disaggregated (stock
country, style, industry)

ii.

stability

iii.

regional covariances



scenario testing



downside risk



assessment



external threats


Minimum number of stocks


3.
Benchmark risk (stocks)



Active money controls


country


sector


stock












Three levels of risk control



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Risk Control


Take stock rankings and build initial optimal portfolio


Optimal portfolio characteristics:


stock risk

70%


country risk

15%


sector risk

10%


style risk

10%


Main sanity checks:


consistency with regional desk portfolios


consistency with Sector & Themes output


risk profile


Control of risk key to achieving objectives



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Investment

Directors

monitor

day
-
to
-
day

decisions

of

portfolio

managers


Front

office

software

system

-

tracks

holdings

and

weightings

of

portfolios

-

on
-
line

access

to

portfolios

and

dealers


Accounts

and

Settlements

Department

monitor

activities

within

a

portfolio
.

e
.
g
.

-

share

transaction

reports

-

valuations

etc
.


External

custodian


-

all

trades

details

are

sent

to

external


custodian

for

settlement

and

reconciliation


purposes


Compliance

Department

monitors

adherence

to

investment

guidelines,

internal

policies,

external

regulations,

etc
.


All

deals

centralised

through

separate

dealers


Internal

audit

performs

independent

reviews

of

systems

and

controls

Transaction

Monitoring Systems

(UNIX (AS400))

Central

Dealing

Internal

Compliance

Front Office

Software System

(OSIRIS)

Internal Audit

Monitoring

And

Control

of Portfolio

Investment

Directors


Clear accountability

Portfolio Management

Monitoring and Control





Part of Fleming Asset Management


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Risk Management & Middle Office


IM Business Information Process Flow

:
NOVA is not an IM system.

Note:

The diagram above depicts the major systems and data feeds involved in the IM business
information flow; it does not cover all detailed data transmission between systems.

Confirmed Trades

Portfolio

Holdings

Stock
Info

Trades Info

Fund Info

Front Office
Process

Back Office
Process

OSIRIS

Decision Support


view portfolio holdings


view transaction history


view cash movement


view bank balance


other queries


generate orders

Fund Manager

OES

Dealer

Execute Orders


acknowledge orders


release orders


execute/allocate

orders


close orders


cancel orders


VWAP

Monitor Orders


monitor progress

of order process


create orders

Report

Generate Reports


mgmt reports


compliance reports


trade reports

JAFFA


fund valuation


stock master


broker master


settlement


others

Back office Tripwire

Front office Tripwire

Order

Potential Advertent

Breach

Accepted

Order

Market Breach Report

NOVA*



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Summary


Global organisation with local regional expertise


breadth of expertise


depth of investment resources


Team approach to investment management rather than ‘star’
system


consistent application of investment disciplines and method


All clients receive our very best investment ideas and
performance


elimination of manager specific risk



Part of Fleming Asset Management


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Client Services


Monthly

valuation

reports


Quarterly

portfolios

review

reports


Quarterly

meetings


Special

market

reports


Ad

hoc

reports

/

meetings


Full

documentation

tailored

to

clients’

requirements


Performance

analysis