Philippine state pension delays debut mandates

The $10 billion Social Security System has been planning to award portfolios to external fund houses for the first time, but must wait for a new chief to be named before it can proceed.
Philippine state pension delays debut mandates

The Philippines' Social Security System is having to delay the outsourcing of its first investment mandates to domestic asset managers pending the appointment of a new head. 

SSS, the state pension fund for private-sector employees, has 33 million members and P500 billion ($10.3 billion) under management, all of which is run internally.

Emilio de Quiros, president and chief executive of SSS for nearly six years, was appointed by the previous administration and remains in the role on a holdover capacity. The new Philippine president, Rodrigo Duterte, is expected to appoint a new head soon.

De Quiros told AsianInvestor last month that SSS planned to hand P1 billion to each of three fund houses to invest in onshore equities and fixed income. The institution was already going through the manager search process for the total P3 billion ($61 million) in mandates.

Overseas ambitions

The move will be the scheme's first experience of using external fund firms before it likely ultimately invests overseas with the help of international managers, said de Quiros (pictured below).

"We have been looking at investing offshore; that has been the assignment of the investment team," he noted. "To move towards that, we planned to hire local fund managers so we get the feel of how to utilise external managers. 

"If we start to move to foreign investment options, we would probably be hiring foreign managers as well."

It is not clear whether this will remain the objective once a new president is appointed. 

SSS's charter allows it to invest up to 7.5% in foreign currency, but so far it has not made any offshore allocations. 

The fund's portfolio comprises: government bonds (37%), equities (24%), corporate bonds (8%), salary loans (16%), real estate (3%), bank deposits (9%) and housing loans to members (3%).

Meanwhile, SSS is discussing certain restrictions being relaxed, such as those on investing in infrastructure. The fund wants to buy domestic infrastructure assets, but the guidelines prohibit it from investing in companies or investment vehicles with no track record. This has prevented it from buying suitable infrastructure assets, noted de Quiros, because most of the country's private-public partnership (PPP) investments are new.

He said a proposed bill had been filed with the new Congress under Duterte that aimed to revise some of these investment restrictions. 

SSS has been eyeing domestic infrastructure assets for over five years. De Quiros told AsianInvestor in May 2011 that the fund was looking at investing in the government’s PPP initiative.  

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