GSIS inks investment deal with foreign fund managers
Manila (13 February) -- The GSIS signed the Investment Management Agreement (IMA) with its international fund managers, Credit Agricole Asset Management (Singapore) Ltd. and ING Investment Management, involving up to $1 billion in investible funds for the GSIS' Global Investment Program (GIP) on 25 January.
With the IMA signing, which took place at the Manila Peninsula Hotel in Makati City, the GSIS formally awarded the GIP mandates to Credit Agricole and ING.
The two will manage funds starting at $300 million each.
PGM Winston F. Garcia said the pension fund decided to invest abroad so that it can meet the future claims and benefits of its members.
"We have a continuing obligation to see to it that our assets will not only perpetually grow, but will be sufficient to match the contingent and future liabilities of the GSIS to its members. The GIP is one the ways of fulfilling this obligation," he said.
The program is also consistent with the good investment practices of public pension funds like the California Public Employees' Retirement System and the California State Teachers' Retirement System, as well as the direction being taken by pension funds among Asian neighbors, such as the National Social Security Fund of China, the Government Pension Fund of Thailand, and the Employees' Provident Fund of Malaysia.
The fund managers are given the flexibility to determine their investment strategy, both in the asset allocation and the instrument selection. They are, however, required to comply with the absolute return requirement of an eight percent floor limit in annual return on investments (net of fees) and a ceiling of seven percent on the portfolio volatility.
Credit Agricole has total assets under management of approximately $725 billion and is given a fund manager rating of "M2" by Fitch. Organizations that earn such a rating are considered generally stable, well-capitalized investment management companies with a track record of profitability. The company is also the pioneer in absolute-return strategy in Europe.
The asset portfolio it has proposed to the GSIS is composed of global bonds, Asian equities, global equities fund, and cash equivalents.
On the other hand, ING has had a solid presence in the Philippines since 1990 and has around $503 billion in assets under management. The asset allocation it has proposed for the GIP includes a mixture of global high dividend, global property securities, global fixed income, and alternative investments.
Earlier, the GSIS named Citibank, N.A., as the global custodian of its funds for the GIP.
As the one in charge of the safekeeping of the GSIS' assets intended for global investments, Citibank will also be responsible for the income collection, transactions settlement, fund valuation and accounting, compliance monitoring, transition management, and securities lending related to the program.
Citibank was chosen for its extensive proprietary network, spanning 47 of the 86 markets covered by its global custody infrastructure. It also has a long standing relationship with Philippine entities, having been rooted in the country since 1902. In fact, the company has been the global custodian of the externally managed funds of another Philippine government agency since 1998. (GSIS/PIA) [top]