US, EU, Japan to be focus of GPF's foreign investments
Next year, the Government Pension Fund will maintain its investment focus on the equities of major industrial economies, such as the United States, Europe and Japan.
Secretary-general Sopawadee Lertmanaschai said yesterday that foreign stock holdings had risen from 10 per cent to 15-17 per cent of the GPF’s investment portfolio, which is close to the ratio for local equity investment. The return of foreign stocks was 21 per cent.
The US, the European Union and Japan are attractive to the GPF as their economies are recovering, but their stock prices have not increased significantly. When the US Federal Reserve starts to curb its monetary stimulus, more capital is expected to flow back to the equity markets of those three markets, she said.
However, the weighting of foreign stocks will not increase much in the near future because foreign investment has already reached 24.8 per cent of the portfolio, close to the policy limit of 25 per cent.
This rule may be revised to 40 per cent to allow the GPF to go deeper into foreign investment. The GPF expects this request to be approved, but its foreign-equity investment ratio will not increase sharply in the initial stage, more likely to about 30 per cent.
The GPF’s investment mix is 17.03 per cent stocks, 5.62 per cent bonds, 1.04 per cent global real estate, 0.29 per cent basic infrastructure, 0.08 per cent private equity and 0.77 per cent commodities.
Besides foreign stocks, the GPF plans to invest more in real estate, basic infrastructure and private equities, which tend to provide stable and higher returns, similar to what the GPF has seen with other countries’ pension funds.
The GPF has expanded to China after obtaining a permit last month to invest up to US$100 million (Bt3.15 billion). It plans to begin investing next year, mainly in Chinese stocks and bonds.
The GPF’s assets under management have increased 46 per cent to Bt624.53 million from Bt428.85 million four years ago.
The average investment return back then was about 7 per cent, which is not bad considering the 60-per-cent investment in bonds, which exceed the inflation rate by 4 per cent. Most of the investment return is derived from stocks, Sopawadee saud.
