Not too much attention has been paid to the National Social Security Fund (NSSF), especially when compared to the China Investment Corporation. The reason for this is simple: the fund was only permitted to invest 7 percent of its total assets in foreign markets. However, this is apparently changing, as the fund will increase its international portfolio to 20%. By allowing more investment overseas, the government is hoping to ease pressure on the Yuan.
It also makes sense from a portfolio management perspective: according to Zhang Haochuan of Z-Ben Advisors:
“NSSF’s investment now is concentrated in the domestic market…But China’s capital market is only about 10 percent of the global market, so investing up to 20 percent of assets in places like the U.S. and Europe is not too much.”
The fund currently has about $100 billion in assets and plans to have around $150 billion by October of next year. So, the NSSF will soon have a foreign portfolio in the $20-30 billion range, which is nothing to sneeze at! Moreover, the fund will be expanding its alternative allocations, which means this announcement should have implications for lots of different types of asset managers.
At the very least, I imagine we’re going to start hearing a lot more about the NSSF…