MANILA, Philippines - The $600 million global investments of state-run pension fund manager Government Service Insurance System (GSIS) earned $70 million in almost three years despite the financial crisis in the US as well as the debt crisis in Europe, the agency’s head reported yesterday.
GSIS president and general manager Robert Vergara told reporters Friday that the pension fund manager would review its Global Investment Porgram (GIP) to decide whether the funds would be shifted to emerging markets in Asia from developed countries like the US and Europe.
Vergara said the funds being handled by foreign fund managers now amount to $670 million from $600 million when the GIP was launched in April 2008.
He pointed out that about $455 million of the GSIS’ fund is placed in the Amundi balanced fund managed Credit Agricole that is invested in fixed income in developed markets while $215 million is managed by the world’s largest fixed income fund manager Pimco that has over $1 trillion in assets.
In 2008, the GSIS tapped has tapped ING Investment Management and Credit Agricole Asset Management (Singapore) Ltd. as the fund managers of the GIP handling $300 million each. The GSIS also assigned Citibank NA as the global custodian of the funds.
However, Vergara explained that the GSIS decided to take its money back from ING due to poor returns and decided to allow Pimco to handle $200 million worth of funds.
According to him, the $300 million fund handled by ING lost about 9.5 percent of its value but the pension fund was lucky enough as the strong peso translated to a 10.5 percent rise in the investments.
The GSIS has set a requirement of an annual eight-percent floor on return on investments (net of fees) and a ceiling of seven percent on the portfolio volatility for the global fund managers of the GIP. The managers were given enough flexibility on where the assets would be allocated so long as they meet the benchmark set by the GSIS.
The GSIS has temporary put on hold the appointment of additional fund managers for the remaining $400 million of its $1 billion GIP.
As part of the review of the three-year mandate given to the global fund managers now handling the GSIS’ overseas exposure, Vergara said the pension fund manager would also take into consideration other options such as shifting the investments to emerging markets or even the domestic market.
“It is possible that we will review the program. We will continue our international diversification but focus on emerging markets. Why invest in the US and Europe now that these countries are experiencing slow growth and high unemployment,” he said.
The GSIS said the investible funds of the pension fund manager currently stands at P280 billion.