The Philippines’s state-run Social Security System (SSS) plans to issue external investment mandates over the next 12 to 24 months but also wants to improve its in-house investment capabilities.

And it is currently in the middle of deciding a batch of those mandates, its top executive has told AsianInvestor this month.

“SSS is investing a total of P9 billion ($166 million) in local mandates, with allocation of P3 billion each in balanced, pure equity and pure fixed income funds,” SSS's president and chief executive officer, Emmanuel Dooc, said. “The maximum deployment would be P9 billion for nine mandates.”
 
The follows the announcement in July by SSS, which has P491 billion in assets under management, that it had invested P3 billion in domestic mutual funds for the first time.
 
Less than 1% of SSS’s AUM is handled externally, while the rest is internally managed.

Dooc did not provide further details on the makeup of the new mandates but signs are that it is hoping to better diversify its holdings, including abroad. The social security fund -- covering workers in the private, professional and informal sectors -- does not invest yet in markets outside the Philippines, but it is hoping to.

“Depending on the result of the charter amendment, SSS may expand its foreign investments,” Dooc said.

The SSS executive has been vigorously pushing for amendments to the organisation’s charter, which would allow the Social Security Commission, the policy making body of the SSS, to allocate funds into hitherto restricted investment assets.

Among the changes it wants is to be able to invest in investment-grade bonds rated less than AAA. And even though it has yet to put money to work in overseas markets, it also wants to increase the overseas investment limit to 15% from 7.5%, Dooc said. 

In addition, it has previously said it wants to better diversify its portfolio by directly investing up to 25% in a wide range of projects including toll roads real estate, utilities, and even lotto operations.

The charter amendments are reportedly expected to be passed by the country's legislature by the end of this year.

HIRING DRIVE

Dooc said Quezon city-headquartered SSS is also seeking to expand its investment team and recruit people to unfilled positions, without going into detail about the kinds of roles he is looking to fill.

The investment team accounts for 58%, or 239, of the 414-strong workforce at SSS, he said.

“At the executive level, only nine are currently occupied from the total of 30 positions,” he added.

Enhanced in-house investment capabilities are likely to be a priority for a social security fund that has seen its assets grow sharply from just P6 billion ($110 million) in 1957.

At the end of June, about 45% of SSS’s investments were in government securities, 20% in equities, 18% in member loans, 7% in corporate notes, and 6% in real estate, with the rest parked in bank deposits and mutual funds. Its mid-year facts and figures sheet also shows an annualised rate of return of 5.5%.

Like other asset owners, Dooc expects returns in 2018 to be lower compared with the previous year. 

Domestic challenges are also likely to keep a lid on investment returns, he said, noting the onset of mid-term elections in the coming 12 months and inflation, which hit a nine-year high in August of 6.4% and could yet pressure the central bank to further raise interest rates. 

That said, Dooc is only "expecting tempered inflation…potentially peaking in August or September.”

On the upside, Dooc believes the growing trade war between the US and China could yet be good news for the country.

“In the trade conflict between the US, China and the rest of the world, we view the US as having the upper hand or the advantage due to its big market and being a net importer. We view it as a positive for the Philippines since both the US and China will be courting the Philippines as an alternative trade partner," he said.