Thailand’s Government Pension Fund turns 20 this year and is looking to ensure its sustainability for another two decades amid increasingly yield-starved markets by further developing its asset allocation.

The fund, with $21 billion under management and 1 million members, has already revamped its investment committee and management process in recent years. GPF said it had returned an annualised 6.7% since inception, 4.93% in the past decade, 4.94% in the past five years and 4.88% in the past three.

The fund's managers are now aiming to raise exposure to private markets as part of its allocation overhaul. It has exposure of 11.3% to such investments and a target allocation of 14.5%.

GPF is also moving to run more of its global equity exposure in-house. Around 45% of that portfolio is managed internally and smart beta accounts for 5-6% of the global equity portfolio.

This comes after the board was given the green light in March last year to raise the offshore allocation limit to 30% from 25%, where it remains currently.

In the past four years GPF has been expanding beyond domestic assets and now has a global portfolio in real estate, infrastructure and private equity. Its exposure is 4.4%% to Thai property, 2.7% to foreign property, 0.9% to domestic private equity, 1.8% to global PE and 2% to infrastructure (both local and foreign).

Private markets expansion

Man Juttijudata, senior director of investment strategy, told AsianInvestor: “The investments we have been doing have become much more complex, and we are getting into new areas such as private markets.”

In the last two years GPF has been developing the investment process in such a way that some of the complex decisions previously made at board level will now be handled more by the investment committees, said Juttijudata (pictured left).

“It is quite difficult to make invest decisions piece by piece,” he added, “so we have managed to streamline that process and create more efficiencies.”

The previous three levels of approval – an internal investment committee (IC), an external IC and the board – meant it could take at least three months to make an investment, said Juttijudata. “Now we have cut the approval time to about six to eight weeks.”

Alternatives adjustments

In terms of specific exposure, GPF last year increased the allocation limit on real estate from 8% to 12%, although the current allocation is 6.5%.

Overseas private equity is another area the fund has sought to expand in the past three to four years. “We decided to go with separate account mandates, in order to effectively cover high-conviction mid-market managers across the globe in this highly fragmented universe,” said Juttijudata. The current allocation to global PE is 2%.

In infrastructure, where GPF has a 2% ($200 million) allocation, the managers decided to take a more direct approach. They invested in a globally diversified private infrastructure fund rather than a fund of funds, with a small proportion of assets in Thailand.

As for other alternative assets, GPF is not investing so much in hedge funds, but rather multi-strategy absolute-return funds, said Juttijudata. The current allocation is 3.4%, but he stressed that the internal team is “still pretty cautious about how we want to proceed”.

Within the international portion of the portfolio, GPF invests about 15% in Southeast Asia and the remainder outside the region. Real estate investments are about 60% domestic, with a high proportion of direct investment in Thai real estate and a certain allocation to property funds.

Reshaping strategy post-2008

All this has come on the back of GPF's decision to reshape its allocation since the 2008 financial crisis, adding new strategies to the conventional fixed income-heavy portfolio of old.

For example, it made its first move into absolute return in 2013 and issued its first multi-asset mandate in 2014. The fund also invested in Chinese equities and bonds through the qualified foreign institutional investor (QFII) quota it received in 2015.

Headcount-wise, the internal investment team numbers 40 people and has remained stable for the last six years, following a turbulent period in 2009, when the previous long-standing director general Visit Tantisuntorn left the fund.

“GPF is a good training school for young investment professionals,” said Juttijudata. “We do a lot of investment globally and in private markets, which is probably quite unique in Thailand. That is why a lot of talented young people come here and then move on in their career.”