Taiwan’s Bureau of Labor Funds (BLF) has announced a strategic shift by excluding mainland China from its new overseas investment indices. This decision reflects BLF’s broader effort to mitigate investment risks associated with China and Russia, as outlined in a statement released on August 4 by Deputy Director General Liu Li-Ju.
Liu stated that the exclusion of mainland China from new investment mandates is part of the fund’s proactive measures to manage investment risks. While the statement did not specify when this exclusion began, it emphasized that BLF has maintained minimal direct exposure to mainland China’s A-shares. As a result, any potential impact remains manageable.
The BLF’s exposure to mainland China amounted to approximately $1.57 billion at the end of 2023, which represents only 0.8% of the fund’s total assets. As of June 30, 2024, the BLF’s total assets were valued at NT$7.37 trillion ($226.8 billion), with a reported investment return of 13.1% for the first half of the year.
The BLF’s decision follows recent economic difficulties faced by mainland China, including sluggish domestic consumption, investment challenges, property market bubbles, and growing financial risks. Additionally, the fund has clarified that it does not directly invest in Russian stocks or bonds, although some of its externally managed investments were passively exposed to Russian and Chinese markets due to index-tracking.
As of June, approximately 52% of BLF’s total assets were managed externally, while 48% were managed in-house. The fund acknowledged that it could not have predicted the impact of the Russia-Ukraine war on financial markets and thus could not abruptly liquidate its assets.
Liu emphasized that the BLF will continue to work with external managers to monitor developments related to Russian sanctions and adjust positions as needed to safeguard the fund’s interests. The fund’s investments related to Russia totaled $242 million, representing 0.12% of its assets.
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