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Market Moves

FTSE Russell to Add China A-Shares to Global Indexes

Move expected to bring initial passive inflows of $10 billion.

By Chris Butera

FTSE Russell will join the MSCI next year when it adds Chinese stocks to its global indexes, with A-shares representing 5.5% of its emerging markets index.

China A-shares will be added in June 2019, as part of a three-stage plan. The 5.5% inclusion will constitute initial passive net inflows of $10 billion worth of assets under management, the firm said. A-shares generally are restricted only to Chinese investors.

“The Chinese authorities have continued to introduce reforms designed to open their market to international investors and have transformed their economy into the second -largest in the world,” said Mark Makepeace, FTSE Russell’s chief executive officer. Because the firm was the first international index provider for mainland China’s benchmarks 20 years ago, he said it would “continue to work with our global clients to provide benchmark and analytic solutions to facilitate their equity and fixed income investments in the region.”

About 1,200 Chinese businesses are expected to be added to FTSE’s indexes in the first phase.

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Dr. Xinghai Fang, vice chairman, China Securities Regulatory Commission, was pleased with FTSE Russell’s A-shares inclusion. He called the move “an important next step in the development of our capital markets and reflects the long-term reforms that have been implemented over the past few years.”

Chinese government bonds will also be added to FTSE’s watch list to possibly become included in other indexes at a later date.

The MSCI added Chinese companies to its benchmarks earlier this year. This week, the firm said it would ponder increasing China’s weight in its emerging markets index to 3.36% from 0.71% over the next two years.

The move comes at a time where China’s market reforms have opened the floodgates for institutional investors wider than before. Due to President Donald Trump’s trade war, Chinese equities have been navigating some choppy seas as of late. The Shanghai and Shenzhen-tracking CSI 300 index, for example, has fallen 15.2% year-to-date. FTSE and MSCI’s inclusion of Chinese equities give them a broader range of investors.

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Home > News > Risk > NJ Pension Fund Returns 9.06% in Fiscal 2018
Risk

NJ Pension Fund Returns 9.06% in Fiscal 2018

Solid returns raise fund’s total market value to $78.2 billion.

By Michael Katz

New Jersey’s Pension Fund returned 9.06% net of fees for the fiscal year ended June 30, beating its benchmark of 8.65%, and helping boost its total value to $78.2 billion. The fund’s assumed rate of return is 7.5%. 

“This is certainly welcome news for both the state and local governments, and most importantly, public employees,” said New Jersey Treasurer Elizabeth Maher Muoio in a release. 

According to the New Jersey Division of Investment, the state’s pension fund had three-, five-, and 10-year annualized gains of 6.9%, 8.23%, and 6.75%, respectively, compared to its benchmark’s returns of 7.21%, 8.00%, and 6.36%, respectively, for the same time periods. The fund also has 20- and 25-year annualized returns of 6.17% and 7.99%, respectively, however, there was no comparable data for its benchmark.

The top-performing asset classes in the portfolio were private equity, US equities, real estate, real assets, and global diversified credit. Buyouts-venture capital returned 17.94% for the fiscal year, debt-related private equity earned 14.97%, while US equities returned 12.78%. Real return real assets and commodities increased 12.7%, and equity-related real estate gained 12.59%.

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The fund’s investment portfolio has tech-heavy slant as its five largest US equity holdings are Amazon, Microsoft, Apple, Alphabet (Google), and Facebook. The fund’s target asset allocation is 56.25% in total global growth, 21.5% in total income, 8.75% in total real return, 8.5% in total liquidity, and 5% in total risk mitigation.

The state has a scheduled pension contribution of a record $3.2 billion for fiscal year 2019.

Despite the fund’s gains, New Jersey still has a funding ration of 31%, one of the worst in the country.

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