Thailand’s $22 billion Government Pension Fund is in the process of funding its first multi-asset mandate as it moves to further increase its offshore exposure.
The global macro portfolio will initially be $300 million, with the allocation expected to double by 2016 if all goes well, said Man Juttijudata, senior director of GPF’s strategic department.
The fund has approved a list of six asset managers to run the mandate, three of which will oversee the initial 2% allocation. One of them is understood to be the UK’s Baring Asset Management, but AsianInvestor could not ascertain the identity of the other five, and GPF declined to provide any names.
This mandate comes as the Bangkok-based retirement fund awaits parliament's approval to raise the limit on its foreign allocation to 40% from 25% – which it hopes will happen this year. GPF has been steadily boosting its offshore exposure for several years; it now stands at 25%, up from 19% in late 2011. Its foreign alternatives allocation is also on the rise.
The fund wants to further boost its global and alternative asset exposure and move more into absolute-return strategies, Man told AsianInvestor. As part of this it is reviewing its equity and fixed income portfolios and plans to boost its emerging-market allocation, which has already risen around 4 percentage points since 2011.
GPF started the multi-asset mandate manager selection process in March with a long list of 20-30 global firms, which it cut to a shortlist before finalising its choices in June. The funding process has just started.
The portfolio can include equities, fixed income, foreign exchange, commodities and other alternatives such as property, with a focus on liquid assets such as real estate investment trusts. As with GPF’s other active mandates, the retirement fund allows managers to use derivatives and exchange-traded funds – up to a certain risk budget – to help generate alpha.
The mandate’s target return is Libor plus 4% with a volatility target of below 10%. “We wanted to be fairly conservative initially,” said Man, adding that GPF wants to limit downside risk, diversify portfolio risk and generate alpha through active managers.
Another objective is to gain knowledge transfer from the external managers about tactical asset allocation, he added. “We want to learn about what are the critical factors for the managers in making decisions on asset classes.”
Barings is well known for its multi-asset capabilities, but it declined to confirm it had won a mandate from GPF. A spokeswoman would only say that the firm had won a “handful of mandates for absolute-return multi-asset strategies from key institutions in North Asia and South Asia”.
Other firms well known for their multi-asset strategies include JP Morgan Asset Management, Schroders and Standard Life Investments.