Thailand
Thailand: GPF eyes more stable returns with new investment strategy
The Government Pension Fund (GPF) has shifted its investment strategy towards more stable returns amid the global economic slowdown and Sino-US trade spat.
The pension fund for civil servants aims for an average of 4% per year in returns between 2019 and 2021, said secretary-general Vitai Ratanakorn.
For the worst case scenario when comparative benchmarks yield a negative return, the GPF will try to avoid plunging into negative territory, he said.
To smooth out the return, the GPF will seek approval from the Finance Ministry in the middle of this month to lift its ceiling on overseas investment to 40% from 30% at the moment.
If approved, the pension fund will prioritise its investment in alternative assets and absolute return funds, said Mr Vitai.
Overseas assets account for 28% of the pension fund’s assets, close to the 30% ceiling. Raising the limit is needed to enable it to seek higher returns, he said.
The 10% increase in overseas assets could equal 40 billion baht, with 4% likely allocated to infrastructure, real estate and private equity funds; 1.5% each in absolute return funds and global equities; and the remaining 3% to global debt instruments, said Mr Vitai.
These asset classes contribute steady returns with low volatility, while higher investment overseas will diversify risks and could lead to higher returns, he said.
To mitigate risks from foreign exchange and wild swings in bourses, the GPF will increase use of derivatives.
Mr Vitai said the change in investment strategy is meant to achieve the pension fund’s target, enabling its members to have income after retirement at 80% of their final month’s contribution.
The total assets of GPF amount to 940 billion baht, of which 400 billion is member contributions and benefits, and 540 billion is government contributions and benefits. The pension fund yielded a 5% return to its members at the end of last month.
Developed economies’ equities generated the highest return of 16.8% this year, followed by emerging markets at 12.4%, absolute return funds 11.7%, global private equity funds 10.2%, while Thai shares yielded a return of 3.8%.
Mr Vitai said higher investment abroad can help ease pressure from the baht’s strength and cashes in on the global markets’ rebound.
Source: https://www.bangkokpost.com/business/1809589/gpf-eyes-more-stable-returns-with-new-investment-strategy