INTERVIEW-UPDATE 1-Taiwan pension fund plans to up equity assets

* $9.7 bln fund plans increase in equity allocation

* to raise mandates to foreign and local managers

* to set 8-9 pct annual return target (Adds quotes, details throughout)

TAIPEI, March 6 - A Taiwan government pension fund with T$340 billion ($9.7 billion) in assets may almost double its equity allocation this year, provided the global economy starts recovering from a recession.

The Public Service Pension Fund, one of Taiwan's four state-run pension funds, plans to have as much as 60 percent of its assets invested in equities this year, up from a current allocation of around 35 percent, Chairman Chang Che-shen told Reuters in an interview.

"We will focus on attaining stable returns this year," Chang said. "If the economy bottoms out, we will invest more money in stocks."

The pension fund, together with the other three, was hit hard by the global financial crisis, posting T$86.1 billion in total losses -- realized and unrealized -- in 2008.

That represented a 22.3 percent loss of the fund last year, versus a 46 percent slide of Taiwan's broader market <.TWII>.

The fund will also increase foreign mandates by T$30 billion by July from about T$61 billion now, Chang said.

Mandates to local fund managers will jump by T$20-T$45 billion versus T$48.8 billion during the same period, Chang said in his first interview with a foreign media since he became chairman of the fund last year.

RETURN TARGET

The fund plans to award more mandates to foreign fund houses, expanding from its current outsourcing list of State Street <STT.N>, Franklin Templeton, Invesco <IVZ.N> as well as fund arms of BNP Paribas <BNPP.PA> and Credit Agricole <CAGR.PA>, said the chairman.

"Many foreign financial institutions have visited us, expressing their interest in winning new mandates," he said, adding these firms included fund units of HSBC <HSBA.L> <0005.HK> and U.K.-based Prudential Plc <PRU.L>.

A bidding for the new mandates is scheduled around June.

Citigroup <C.N> is the custodian bank for the pension fund's overseas assets, Chang said.

Chang said the fund will set a 8-9 percent annual return target for those being awarded new mandates.

"We will examine their performances on a yearly basis. For those who fail to meet the target, we could cut their management fees." ($1=T$34.8)