Thailand's GPF reviews offshore investment programme

The $13 billion Government Pension Fund is investing more in foreign assets and has chosen Towers Watson to advise it on manager selection and portfolio allocation.
Thailand's GPF reviews offshore investment programme

The Government Pension Fund (GPF) in Thailand has hired Towers Watson to help it choose asset managers for its offshore equities and fixed-income portfolio, switching from Russell Investments’ multi-manager structure. 

Equities and fixed income account for the vast majority of GPF’s international assets, and the fund is substantially boosting the $1.8 billion it allocates to these investments, says Triphon Phumiwasana, director in the external funds department. He would not specify the precise amount.

GPF is also planning to boost its investment in overseas private equity, real estate, commodities and infrastructure.

These moves are in line with a trend among some of the larger Southeast Asian institutional investors – most notably in Malaysia – to look increasingly offshore for diversification and higher returns. (See AsianInvestor magazine’s cover story in the February 2011 issue for more details.)

The institution, with $13 billion in assets under management, had put out an RFP and, after a competitive tender process, chose Towers Watson in November.

"GPF would like to review and rethink what we have done and what could be improved," says Triphon. "So we searched for a consultant towards the end of last year and made the decision to hire Towers Watson recently to help us on the global investment platform, including reviewing the existing platform and fund manager selection."

GPF had been using US firm Russell as its responsible entity for choosing and administering managers for foreign assets for four years. The formal contract with Russell had run out in 2008 and was not reactivated, but the fund continued using the firm.

Triphon says GPF has been happy with Russell as the responsible entity of the fund, but last year decided to review its offshore investment strategy; hence the decision to invite five consultancies, including Russell, to pitch for the mandate.

“We wanted to re-evaluate the programme of fund manager selection,” says Triphon, “and we have more allocations to allocate, so we issued the RFP to look at the ideas everyone could offer.”

The entity still uses multi-manager structures for other parts of its portfolio, he adds, but “there are issues with allocation we wanted to think about, and we felt Towers Watson will be able to provide the best ideas for this”.

The consultancy will ultimately help with manager selection, as well as portfolio-allocation and risk-management advice.

Towers Watson started working with GPF in early December, when its Asia-Pacific head of portfolio advisory, Peter Ryan-Kane, moved to Bangkok from Hong Kong to initiate the programme.

The consultancy operates a regional portfolio advisory team around the region, and it brings members of the team together for big projects like this one. Ryan-Kane brought to Bangkok a project manager from Korea, an analyst and a portfolio construction specialist from Hong Kong, and a strategic portfolio expert from Australia. The firm did something similar last year for another client.

“This reflects our belief that having a regional team and being able to bring together the best regional expertise on the ground for each client is the best model,” says Ryan-Kane.

He returned to Hong Kong this week after the initial phase of work was completed. The second phase is now starting, and he will be returning regularly for a week or so per month for the next year until the maintenance contract is set up and running.

Ryan-Kane declines to reveal the length of the contract, but says it’s “based on a long-term commitment from both sides”, given the amount of time and effort that’s gone into implementing it. 

Towers Watson has won a couple of other fairly major mandates in Asia, he adds, without disclosing names. “The wins have some consistency about them, in that [clients] are moving beyond traditional strategic asset allocation and more towards tailored portfolio construction, such as building in more specific risk constraints given what happened in 2008/9.”

“Generally speaking, across the region most institutions have now done or are completing the strategic reviews they started in 2008/9 and now moving to implement them,” he says. “Most work now is portfolio construction, meaning more money is being deployed offshore.

“It is resulting in more innovative thinking, in terms of the returns they are trying to generate,” says Ryan-Kane. “The days of having a modest offshore programme are over – institutions are looking at more deliberate allocations now.”

Russell declined to comment on the matter, as GPF remains a client of theirs.

However, the US firm has had recent success elsewhere in Asia, being selected as transition manager by Taiwan’s $16.2 billion Public Service Pension Fund (PSPF), a mandatory defined-benefit scheme for civil servants, teachers and military personnel in Taiwan.

Russell will manage transitions for PSPF of various non-Taiwanese assets, including global and emerging-markets equities, under the five-year contract.

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