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.
Nine international fund mangers made it to the GSISÆ short list: BNP Paribas, Credit Agricole Asset Management, Credit Suisse Asset Management, Deutsche Asset Management, ING Investment Management, Northern Trust Global Investment, Pacific Investment Management Company, Goldman Sachs and Societe Generale. A total of 36 international fund mangers submitted proposals to the GSIS.
ôAt this point, we are still evaluating the proposals very carefully,ö says GSIS president and general manager Winston Garcia. ôWe will choose a maximum of three fund managers. The selection really depends on the investment strategies they have proposed and how comfortable we are with them. If it turns out we are only comfortable with one, then we will go with just one. But if weÆre comfortable with two to three, then we will go for it.ö
GSIS is also set to choose a global custodian for the $1 billion earmarked for overseas investments, which is around 12% of the pension fundÆs total assets. Being considered for this role are Citigroup, JPMorgan Chase and State Street Bank.
GSISÆ basic requirements from the fund managers is a minimum annual return on investment of 8% û net of fees û and a ceiling of 7% on annual portfolio volatility. The fund managersÆ ôtrack record on an absolute return basisö is an important consideration, Garcia says.
GSIS didnÆt set any parameters for asset or geographic allocation. ôItÆs up to the fund managers to demonstrate to us how they plan to meet our requirements [on returns and volatility]. We gave the fund managers the full discretion to allocate the portfolio,ö Garcia says.
Garcia prefers, however, that the overseas investments be as geographically diversified as possible, tapping capital markets in the U.S., Europe and Asia.
GSIS is also ôopen to the possibilityö of allocating some funds to hedge funds or other alternative investments, as long as the volatility requirement is met. Garcia notes that some of the nine fund managers in the short list included allocations to hedge funds, particularly funds of hedge funds, in their proposals.
The investment mandate that GSIS will award next month will cover a period of three years. ôIf the fund managers we choose perform well, we might just renew [their mandates] instead of doing another search,ö Garcia says.
The $1 billion that GSIS has allotted for its global investment program is just a starting point, and that figure will likely increase over time, Garcia says.
ôOur plan is to privatize the management of our funds,ö Garcia says. ôFund managers will be better at managing our funds. We do not have the network, the resources and the expertise that the fund managers have in order to really have a well-planned investment strategy for a particular investment portfolio.ö
Investing overseas is the only way to achieve the diversification GSIS needs to ensure both capital preservation and consistent returns, Garcia says.
GSIS will have a tough time generating returns for its members if it continues to stick with Philippine shares because of the ôlimitedö choices and relatively low volume, he says.
Low interest rates and the absence of strong secondary fixed-income market in the Philippines are also limiting factors. A fixed-income instrument with one-year maturity provides GSIS with a return of around 3.5% in the Philippines. A seven-year fixed income instrument provides a higher return of 7%, but it ties down GSISÆ assets because it is forced to hold it until maturity due to the weak secondary market.
ôWith the very low interest rates in the country right now, we are losing. ItÆs not enough to maintain the actuarial hurdle rate needed in order to maintain the solvency of our fund.ö Garcia says.
Malaysia's Armed Forces Fund hires new CEO; Canada's Omers appoints Asia capital markets managing director; HSBC Asset Management creates alternatives unit, appoints CIO as its head; Bank of Singapore names global wealth head; Aware Super hires IFA head; Hong Kong names acting head for MPFA; Schroders adding to Asia ESG headcount; and more.
The French fund house becomes the world’s largest responsible asset manager to help asset owners implement sustainable investing, underlining its serious commitment to ESG.
The long-waited infrastructure Reits have finally arrived in China and, while experts see a slow start with hurdles ahead, they say it will later move to a 'big bang'.
AsianInvestor reveals the second half of the standout funds in our latest awards, including equity funds, the top Reit and the best smart beta vehicle.