Even though the economic performance in 2012 was below expectations, the Labor Insurance Fund still managed to achieve remarkable results. These results were largely due to an 11.92% return on the trading of domestic shares, which resulted in an overall return of 6.25%. The full-year revenue totaling NT$31.3 billion was also a three-year high, far exceeding the expected figures of 3.328% in yield and NT$17.1 billion in revenue.
As a social insurance fund, it is essential for the Labor Insurance Fund to maintain liquidity, safety, and adequate of paying out benefits whenever needed, in addition to pursuing returns. The fund derived much of its revenues from domestic shares, as the trading of which alone resulted in a 11.92% gain (compared to the benchmark's gain of 8.87%), and a NT$11.3 billion profit. The fund's foreign investments mainly comprise shares and bonds allocated mainly for safety and income; this portion of the investment delivered a 7.63% return and NT$15.7 billion in profits. Meanwhile, the fund was required to maintain some of its assets in cash due to liquidity concerns and to meet benefit payments or offer loans as needed. Overall, the fund turned in a remarkable performance for the year with revenues totaling NT$31.3 billion and a return of 6.25%.
Generally speaking, the primary problem that plagued the world's financial development in 2012 was still the European debt crisis. In the beginning of the year, the write-down of Greece's debts and the rising yields in Spanish and Italian government bonds had combined to bring chaos to the global financial market. This was followed by the defeat of political parties in support of austerity measures during the May elections held in Greece and France, which gave rise to concerns that the Eurozone may actually end in collapse. Fortunately, at the end of July the President of the European Central Bank announced a commitment to defend the Euro by all means possible, and honored this commitment through action later in September with a plan to buy European debts in unlimited quantities. These drastic measures temporarily relieved the market's concerns toward the potential bankruptcy of European governments. In the U.S., investors' confidence grew as the Federal Reserve Board injected fresh liquidity into the market, with its 3rd and 4th quantitative easings, as the U.S. Congress finally reached a consensus regarding the fiscal cliff towards the end of the year. In terms of real economic activities, the United States, China, and Europe all saw their Purchasing Managers' Indices (PMI) turn favorable in November, an indication of an upturn in the global economy. In summary, 2012 was a year filled with crises and opportunities, which once again proved the wisdom of buying securities in the midst of crisis.
In the latest global economic forecast published by the Organisation for Economic Co-operation and Development (OECD) for 2013, the world's GDP growth is expected to reach 3.4%, far exceeding the 2.9% of 2012. This is a clear sign that the world's economy is recovering, and coupled with the low interest rates and expansionary monetary policies maintained by central banks throughout the world, there is plenty of room for assets across all categories to perform under the improved stability and liquidity. However, optimism aside, now that both the debt crisis in Europe and the fiscal problems in the United States have been solved or temporarily contained, what happens next still deserves our close attention. Furthermore, the prolonged period of expansionary monetary policies has created excessive liquidity, and it remains to be seen whether this phenomenon will induce yet another collapse of asset prices, and whether the weakening of the Yen will provoke a race among Asian countries for the weakest currency.
Despite the intertwining changes that are expected to occur in 2013, the Bureau of Labor Insurance has maintained its asset allocation relatively unchanged from 2012, with 40% in equity and 60% in fixed income, and 60% in local and 40% in foreign securities. The bureau will continue to center its trading strategies for the purpose of delivering consistent returns, and maintain a portfolio consisting of global leaders at the core, supported by regional performers. The bureau will continue maintaining trade flexibility as a means of mitigating systematic risks, and closely monitor market developments to enable tighter risk control and improve fund returns.