China’s two big funds which use a lot of external managers, the $US300 billion China Investment Corporation and the $US150 billion National Council for Social Security Fund, have embarked on a formal three-year review of all funds manager contracts.
The review, which one experienced manager described as “brutal”, was scheduled for completion at the end of March but it is understood the date has been moved out into the second quarter. NCSSF is being assisted by Mercer Investment Consulting, while CIC is doing the review with internal management only.
Managers which have not met their mandate targets in the past three years, for whatever reason, are being automatically excluded and will be replaced, the manager, who is familiar with the process, said.
Neither fund publishes details of all its managers. But the CIC says on its website: “The appointment of a fund manager is through an open, fair, and well ordered process which incorporates a phased approach, including: application, preliminary review, second review, fees and contract negotiation, and result announcement. CIC selects managers based on the application documents, the interview, the experience of the investment teams and track record in the specific asset class, the management fee proposal, and other relevant considerations.”
NCSSF, which uses external managers for about 40 per cent of its assets, announces manager changes from time to time. The last reported changes were in June last year when 12 offshore managers were announced: Lombard Odier, Neuberger Berman, J.P. Morgan, and Schroder Investment Management for multi-asset class mandates; Standish Mellon Asset Management and Stone Harbor Investment Partners for an emerging markets local currency debt portfolio; AGF Investments, Investec Asset Management, RBC Global Asset Management, and J. P. Morgan Investment Management for natural resource stock strategy mandates; and AEW Capital Management, AMP Capital and European Investors for global real estate equity mandates.