The Bt430 billion ($12.9 billion) Government Pension Fund, Thailand's pension fund for civil servants, has scaled back its investment risk profile and may not return to its pre-2008 strategic asset allocation.

Officials at the GPF say they need to poll their membership to see whether civil servants will approve a return to the former asset allocation, which involved significant exposures to international securities and alternative investments, including hedge funds and private equity.

GPF officials say they believe the strategic allocation is in the best interests of the fund and its members, but that without explicit support from the membership, they cannot maintain it.

Under the leadership of director-general Visit Tantisuntorn, the GPF emerged as one of Asia's most progressive and dynamic institutional investors. Although not as large as its brethren in North Asia, the GPF was ahead of the curve when it came to areas such as corporate governance and international investing.

Many public funds have been under strain since suffering losses in 2008, but the GPF has also been entangled in the political standoff that continues to affect Thailand.

In 2008, the GPF recorded its first annualised loss, of -5.4%, but given the sharp declines in global indices, this is not a big fall. It outperformed most hedge funds and well outperformed long-only funds, worldwide. Nonetheless the loss sparked a storm of protest.

The GPF was hardly the only institution to have received such complaints, but in this case, the issue became politicised. Visit is a technocrat who was appointed by the Thaksin Shinawatra administration eight years ago. Some local media - which is largely under the influence of the 'yellow shirt' faction, a coalition including the military, monarchists and business interests - decided to paint GPF's loss as the fault of pro-Thaksin 'red shirts'.

To what extent this political fight affected the GPF cannot be known for sure, but the local media accused Visit of corruption -- charges that have proven to be without substance -- and called for his sacking.

The Ministry of Finance let it be known that it would not support Visit were he to seek a third term as director-general of the GPF. Fed up with seeing his name dragged through the mud, Visit resigned in June, two months before his term was meant to expire. The government has since dropped any pretence of investigating him for corruption.

The past year has been a trying one personally for Visit, but it has also been a challenge for the GPF and its membership.

Visit's deputy director-general, Variya Wongprecha, now serves as interim head, and the GPF and its board of directors is in the process of selecting a permanent director-general -- most likely someone from within the GPF's ranks, say fund executives.

The GPF's staff would like to maintain the good work done under Visit's administration. So far they have not made any official changes to the GPF's strategic asset allocation. As a result, the fund made a positive gain of 7.8% during the first nine months of 2009 (a fact that Visit's opponents haven't gone out of their way to publicise).

But officials acknowledge that they won't increase allocations to target levels in areas such as equities or alternative investments. Nor has the GPF pursued an aggressive rebalancing strategy this year, so it has missed out on some of the market gains of 2009.

Not losing money is now the guiding principle, officials acknowledge, at least until they can launch a campaign to ask the membership to allow the GPF to diversify more into riskier asset classes. That suggests long-term returns may fall short of what members have come to expect.