China social security fund reports annual investment yield of 8.4%

Editor: Vlad Rothstein | Tactical Investor

Random Thoughts

Individuals have been lead to believe that to succeed in the markets they should embrace mechanical systems (Technical analysis) or fundamental analysis. If the premise is wrong then no matter how hard you look, you will not find an answer. (Mainstream) Technical analysis is based on a fixed set of rules and in that sense does not differ much from Fundamental analysis. Why both Technical Analysis & Fundamentals fail

China social security fund is growing while ours is dying; what gives?

The annual investment yield for the national social security fund averaged 8.4 percent in the 16 years since it was established, according to an official from the National Council for Social Security Fund.

Wang Zhongmin, vice chairman of the NCSSF, disclosed the information at a seminar on Monday.

Established in 2000, the national social security fund was designed to aid the country’s aging population and be a strategic reserve to support future social security expenditure.

The funding sources include fiscal allocation from the central government, allocation from the lottery public welfare proceeds, individual contributions and capital raised by other methods approved by the State Council.

By the end of 2015, the fund’s managed assets totalled 1.9 trillion yuan ($276.6 billion), according to a report from the NCSSF.

About 54 percent of its assets were invested via entrusted bodies, while 6 percent were invested overseas, according to the report. Full Story

China’s pension fund investment grows steadily

By the end of June, 14 provincial-level regions including Beijing and Shanghai had signed contracts to entrust a total of 585 billion yuan (about 87 billion U.S. dollars) in pension funds to the National Council for Social Security Fund (NCSSF), according to Lu Aihong, spokesperson with the Ministry of Human Resources and Social Security.

Of the total, 371.65 billion yuan is already in place and has been invested, Lu told a press conference.

The ministry will continue to encourage more regions to put pension fund into investment and at the same time strengthen risk management to secure long-term and stable investment return, he said.

As a significant part of the pension reform, pension fund investment aims to tackle the challenge of an aging society and facilitate a fair and sustainable pension scheme. Full Story

China’s pension fund has US$317 billion up its sleeve

“Putting such a large amount of assets in the China market will make the risk too concentrated and it needs diversification,” he said in an exclusive interview on the sidelines of the ongoing Communist Party congress.

“Firstly, the current proportion is far shy of the government-approved cap and, secondly, it’s for the sake of risk diversification,” the 67-year-old said.

The overseas portfolio of the fund, mainly stocks and bonds, only accounted for 10 per cent of the total, while the government cap was set at 20 per cent, Lou said.

The National Social Security Fund’s annual report last year said its overseas investments had reached 136 billion yuan, 6.7 per cent of its total investible assets.

He said the NSSF would look for more investments overseas but only if returns proved promising.

He admitted that the fund was keen to invest more in alternative markets, but was short of staff with the relevant experience.

“We have only one goal, that is to achieve a high risk-adjusted, long-term return and ensure the appreciation of the social security fund,” he said.

“Investment is very complicated. Some countries are commodity-exporting countries. If you invest in them, it is equivalent to investment in crude oil. Its exchange rate and stocks usually change in line with the oil price.”

However, he said such investments might be necessary from a long-term perspective.

“Look at Russia, how big its currency swing is … But if you can endure that [over the long term], it’s OK. Now, the rouble has appreciated [a lot],”he said. Full Story

Random Thoughts

China social security fund is growing while ours is dying; what gives?

China’s pension fund investment grows steadily

China’s pension fund has US$317 billion up its sleeve

Other Articles of Interest