GSIS promises to be prudent with $1-B fund


Posted at Sep 23 2008 09:30 PM | Updated as of Sep 24 2008 05:34 AM

State-run pension fund Government Service Insurance System (GSIS) said Tuesday that it would be prudent in choosing the foreign managers for its dollar funds invested abroad.

GSIS president and general manager, Winston Garcia, said in a statement that he would require the 30 foreign fund managers who have expressed interest in managing the remaining $400 million of its $1 billion Global Investments Program to disclose their exposures in firms affected by the financial fall out in the United States. 

"As a matter of prudence, we have required all our potential bidders to disclose their exposure in the US market...especially their asset-backed or mortgaged-backed investments," Garcia wrote. 

GSIS expects to shortlist the number of potential bidders by November. 

Earlier, a former senator accused GSIS for its lack of transparency regarding its placements abroad. 

The pension fund has earlier commissioned ING Investment Management and Credit Agricole Asset Management (Singapore) Ltd to each manage an initial $300 million funds allocated for placements outside the Philippines. It also tapped New York-based Citibank NA as its global custodian. 

GSIS's $1-billion Global Investments Program (GIP) was meant to provide higher investment returns that would pull up the average rate of its total investments. It has investments in the local markets, which it said were not deep and liquid enough to absorb its massive investment kitty. 

For its first $600 million tranche, Garcia was able to secure favorable terms from ING and Credit Agricole: assured returns averaging 8 percent per year and an average volatility of not more than 7 percent. The funds are locked for a three-year term.

"We have taken a three-year view for the GIP. The market may be down now, but over the next couple of years it could bounce back. We also must remember that in every crisis, there is an opportunity. The freefall of the US stocks means stocks have become cheap. Over time, it'll be a good time to buy," he added. 

Garcia also stressed that while ING and Credit Agricole were given the flexibility to determine their investment strategy--both in the asset allocation and the instrument selection, and where they want to allocate the investible funds--the GIP was designed in such a way that "the investments are diversified not only geographically but also in terms of asset class." 

Garcia was trying to reassure its members that its recent foray into the global financial and equities markets would remain sound despite the shake up in the US financial system that resulted in the bankruptcy, sale to competitor, and the bailout of respective Wall Street luminaries, Lehman Brothers, Merrill Lynch, and American International Group.