Thailand’s Social Security Office (SSO) is debating when to issue requests for proposals for up to $2 billion in active overseas securities management, including issuing its first international equity mandates, AsianInvestor can reveal.
The pension fund, which had $38.5 billion in AUM as at the end of March by AsianInvestor AI300 data, is also setting out to recruit more staff across the board.
Last month AsianInvestor exclusively revealed that SSO had appointed a new head of investments, Chompoopen Sirithorn, as reported.
She was promoted from equity fund manager to succeed her former boss Win Phromphaet, who moved on to become chief investment officer of the Thai arm of Malaysia’s CIMB-Principal Asset Management based in Bangkok, as reported.
Currently SSO’s investment portfolio comprises 88% exposure to fixed income, 10% to domestic equities and 2% to onshore alternative assets. Overall its portfolio composition is 97% domestic and just 3% overseas.
But Sirithorn confirmed that the fund would be seeking to diversify by asset class and raise its international allocation in particular. “At $38 billion we are quite large, but we are heavily invested in the domestic market,” she said.
“We would like to be more balanced. We should have a 30% allocation to foreign investment. That is in our five-year strategic plan, but it will be challenging [to reach 30%] and practically it could take longer than that.”
She said SSO was planning to allocate up to $2 billion to foreign investment within the next year, although it was still in the process of setting asset class selection and criteria, with approvals required by the Social Security Committee.
But Sirithorn expressed optimism that it could get matters signed off before the end of this year, with mandates potentially targeting multiple managers. “Mostly this will be global fixed income and global equity, although the proportion is yet to be decided,” she said.
SSO started investing overseas in 2005, with its latest global securities mandates issued in 2008 with under $1 billion handed to four international fixed income managers.
Sirithorn noted that if SSO did issue international equity mandates in the coming months they would be its first. “It [equity mandates] is still not official yet, it is still subject to review,” she stressed.
AsianInvestor reported in November 2011 that SSO had appointed managers for global equity and property mandates. However, Sirithorn confirms the project was subsequently put on hold and no money was exchanged. She said SSO invested in global equity mutual funds with international asset managers instead.
Asked whether exposure to alternative assets would be included in its prospective $2 billion in new mandates, Sirithorn said this was under discussion and that such a move would be more likely to materialise next year rather than 2015.
“We not only want to build our international allocation, but also diversify into different asset classes including alternatives,” she said. “At the moment we do small allocations all to domestic assets such as real estate and infrastructure.”
She noted rotation of its fixed income portfolio to move down the risk curve was under discussion, saying that the $2 billion would be focused on active fixed income and equity.
Separately, Sirithorn revealed SSO was seeking to bolster staff numbers in line with expansion of its asset allocation. The fund has about 20 people in investments, comprising fund managers, research analysts and dealers. Overall the team is 55-strong, including risk management, compliance and back office.
“We want to recruit people in all major areas, including portfolio managers, dealers, analysts, compliance and IT,” said Sirithorn. “We do want to expand our investment quite a lot, so we need a lot of people to help with this plan.”
She said SSO would be launching a recruitment initiative this year and next, predominantly targeting locally sourced talent.
Sirithorn acknowledged, too, that industry turnover was an issue, with SSO having seen some staff leave.
“The team size has been pretty stable, but we have had turnover and not been able to increase the number of staff much on past years,” she said. “Turnover is common for this industry, people will change jobs from time to time.”
Last year SSO returned 5.3%, against a target return of 5.5%. It saw its assets under management grow 13% in the year to March 2015, by AsianInvestor data.
“We are the biggest fund in Thailand and are growing rapidly,” added Sirithorn. “We are a pension fund with a long-term horizon and philosophy, typically five years. The challenge we have is to find the most effective allocation.”
SSO was established in September 1990 to provide social security services to its members and their families. It currently has about 13 million members.