Thailand's Bt150 billion ($3.75 billion) Government Pension Fund will select an investment consultant this week to advise on its asset allocation strategy, and expects to be able to issue a second mandate to help it invest offshore for the first time in the next few months, says Visit Tantisunthorn, secretary general in Bangkok.
Frank Russell, Towers Perrin, Watson Wyatt and William M Mercer are competing for the asset allocation business.
Visit says GPF's existing allocation asset strategy is already on par with international standards, but it wants an expert to confirm "what we're applying now is right". GPF is limited by law to putting no more than 10% into equities or non-rated fixed-income securities, and is barred from offshore investing. The bulk of its assets are in bonds and bank deposits, but it also has 3.5% invested in property and is interested in exploring other alternative investments.
The fund also manages about two-thirds of investments itself, outsourcing the rest to locally domiciled fund managers. Visit says GPF is happy with this arrangement, noting that due to the small size of the domestic market, outsourcing more would merely lead to these fund managers trading the same securities amongst themselves.
One change GPF is grappling with, however, is its desire to provide specialist mandates. Current MoF rules bar equities-only mandates, although Visit says the reasons are merely technical and the regulations are in the process of being scrapped.
While Visit says the asset allocation mandate is separate from a future job for a consultant to help select international fund managers and custodians, no doubt the consultants see winning the first one as a leg up. GPF has submitted a proposal to its regulator, the Ministry of Finance, to change MoF regulations to allow it to invest offshore. Visit believes the necessary changes will be made by the end of this year, so GPF can place an initial tranche of 3% to 5% of its portfolio overseas next year - although each placement will also be subject to Bank of Thailand approval.
GPF knows Thailand's markets inside and out, but has no international experience and will require a consultant to draw a shortlist of fund managers. GPF manages defined benefit and defined contribution retirement schemes for Thailand's three million government employees.