Having invited bids for three $200 million global investment mandates, Thailand’s Social Security Office plans to boost its foreign-asset allocation further with the help of an investment consultant.
The SSO wants to allocate up to 10% of its portfolio to global bonds, global equity, global real estate and other alternative investments – especially commodities and infrastructure – in the next three to four years. The current overseas exposure is around 3.5%, all of which is in bonds, but that will rise to around 6% once the new mandates are funded.
The state body, with $25 billion in assets under management, wants the consultant to provide advice on asset-and-liability management and global strategic asset allocation.
Potential candidate firms may contact the SSO to further obtain a request for information (RFI), says Win Phromphaet, Bangkok-based head of real estate and global investments. The fund has invited responses to RFIs by June 3, to be sent via email to [email protected] or [email protected].
It is following in the footsteps of another Thai state entity, the Bangkok-based Government Pension Fund, which is also boosting its foreign exposure and has chosen consultant Towers Watson to advise it on its offshore portfolio, as reported in February by AsianInvestor.
The SSO's $600 million in global mandates – for which bids are currently being considered – will mark the first time it has invested in global equity and global real estate.
The SSO's main motivation for seeking greater foreign exposure is diversification. “There is a constraint that, as our fund is growing very fast, the local markets cannot absorb our investment demand,” says Phromphaet.
As much as 80% of the SSO’s portfolio is now invested in highly secured assets including government bonds, state-enterprise bonds, bank deposits and investment-grade corporate bonds. The remaining 20% or so is in more risky assets, including other debt instruments, unit trusts (property funds and foreign investment funds) and equities.
Last year, the fund generated a total investment income of $1.1 billion and a return of 8.30%. Since inception, the fund has earned an average investment return of 7.55% per year.
The SSO was set up in 1990 as a government office responsible for managing the Social Security Fund and the Workmen’s Compensation Fund. The Social Security Fund provides coverage to 9.4 million private employees.