The Dutch pension asset manager's Asia Pacific head of real estate says his team has just had one of its busiest years ever and that 2021 is looking similarly promising.
The GPF has around Bt380 billion ($12 billion) in assets, which it manages for 1.2 million civil servants. At the moment, around 85% of GPFÆs assets are invested in the domestic market and the rest, or $1.8 billion, is invested overseas and managed by 13 fund houses.
The asset allocation model that the GPF is currently following breaks down the pension fund's investments into: Thai fixed income, 59%; local bonds, 4%; local equities, 11.5%; global equities, 12%; local real estate, 4%; local private equity, 4%; global real estate, 2.5%; and global private equity, 3%.
The GPF is in the process of looking for a consultant to help it choose the fund managers for the global real estate and global private equity allocations. The consultant will merely serve as the source of the database and information on the fund managers, the choice will be made by the GPF.
GPF secretary general Visit Tantisunthorn says the mandates will likely be awarded to between eight to 10 fund managers, thatÆs four to five each for global real estate and global private equity.
The GPF has not finalised what it is looking for its terms of fund managers and investments. ôWe are not at that stage yet. We need to review the database of the consultant will select, and then make the investment decisions based on that,ö Visit says.
He notes, however, that the real estate investments will be in the form of property funds and real estate investment trusts (Reits). Locally, the GPS also invests in direct property.
Meanwhile, he adds that the pension fund would prefer private equity investments in the area of infrastructure and would choose mezzanine and more mature companies over venture capital investments.
At the start of this year, the GPF increased its maximum limit on overseas investments to 25% from 15%, and thatÆs how it is able to add global real estate and global private equity to its portfolio.
Visit believes that the GPF should continue to increase its allocation to equities, whether foreign or local, and in overseas investments in order to achieve its goal of producing returns higher than the 12-year average inflation in Thailand, which is around 3%.
The GPFÆs net return last year was 9.22%, much higher than the average five-year return of 6.4%. In 2006, its return was 3.7%. Last year was an extraordinary year for the GFP because the equities market in Thailand and other markets performed strongly year-on-year. Plus, Thai equities suffered in 2006 due to uncertainties caused by the military coup in September that year, and the market was not able to recover quickly.
Given the slowdown in the US economy, Visit doesnÆt expect the GPF to top its performance last year and expects a return of around 5% to 6%, closer to its average performance.
ôThe key challenge on the investment side these days is risk management and beating inflation,ö he says. ôWe need to select asset classes that can beat inflation while managing risks in order to protect the downside.ö
One of the main reasons the GPF increased its allocation to overseas markets is the relatively higher volatility of the Thai equities market. ôWe are taking some foreign exchange risks of course, but we believe that, in the long-term, investing more overseas will be beneficial to the pension fund,ö Visit says.
The GPF was created 11 years ago to better serve the retirement needs of ThailandÆs civil servants and to ease the governmentÆs fiscal burden of funding retirement benefits. Civil servants who joined before March 27, 1997 do not contribute monthly to the pension fund; they get as their benefit 100% of their last salary every month after they retire at the age of 60. Civil servants who joined after the cut-off date contribute 3% of their salary monthly to the pension fund, an amount that is matched by their employer; they get as their benefit 70% of their last salary every month after their retire at the age of 60 plus the value of their and their employersÆ pension contributions.
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