GPF aims to increase investment in property

Sopawadee Lertmanaschai, secretary-general of the country's largest pension fund, said GPF members who are going to retire this month could put more of their savings in the fund, anticipating a return from their investment that outpaces the rate of inflation.

"The investment return over the first eight months of the year was still positive, and the fund expects the return to be positive at the end of year, albeit lower than last year," she said.

Market volatility has made it difficult for the GPF to make higher returns, she conceded, referring to a global sell-off due to the sovereign-debt crisis in Europe and the fragile economic recovery in the United States.

The GPF manages about US$16.6 billion (Bt500 billion) worth of assets.

There are about 9,000 civil servants due for retirement at the end of this month, not including those who opt for early retirement. The combined pension payment for these officials is estimated to be about Bt7 billion, she said.

To commit to an investment strategy that gets a return higher than the rate of inflation for these and other investors, the fund will invest more in alternative choices such as hotels, office buildings, serviced apartments and cargo goods, she said.

"We may look to expand our investment in real estate from inner business areas to the outskirts of Bangkok," she added.

The fund will also invest in non-listed firms, known as private equities.

Commodities such as oil, metals and farm products including rice and rubber are also on the list, and this investment could start by early next year, said the GPF chief.

Alternative investment is currently worth about Bt11.5 billion or 6.6 per cent of the portfolio. The GPF plans to raise this to Bt45 billion or 12 per cent of the portfolio over the next three years, she said.

The rate of return from alternative investment has been about 9.2 per cent annually since the fund started to tap this asset class in 2000, she said.

Sopawadee said pension funds in developed economies committed large portions of their portfolios to alternative investment. For example, the average pension fund in the United States invests about 24 per cent of its portfolio, while the level is 29 per cent in Switzerland and 25 per cent in Australia.

Over the past eight months, the GPF has benefited from dividend and interest returns of Bt7 billion, plus gains from share trading of Bt9 billion, she said.

The fund has cash in hand and is waiting for the opportunity to buy shares back, she added.

The GPF has Bt389.1 billion of assets under management.

As of end-August, it had scaled back its foreign shares to 12 per cent of the portfolio from 16 per cent early this year. The global share market dropped 14 per cent during the period.

Over the same period, the fund increased its investment in both local and foreign government bonds from 70 per cent to 75 per cent of the portfolio.