Thailand’s SSO eyes foreign equities for first time

07 July 2014   Category: News, Asia, Global, Thailand   By Daniel Shane

Thailand’s Social Security Office (SSO), which manages about 1.1 trillion baht (US$34 billion) in pension contributions, is lobbying the country’s regulator to allow it to invest in overseas equities for the first time, its head of investment told Asia Asset Management.

The fund currently allocates the vast majority of its portfolio to domestic bonds, Win Phromphaet said, but will look to open offices in global financial hubs as it seeks higher returns overseas. 

“We are now pushing for a change of regulation to allow us to do direct investments offshore. Once we have built up a sizable portfolio, we will probably need to have offices in different time zones, like London or New York, to manage our money,” Mr. Win said. Restrictions regarding investment in foreign securities by Thai institutions are currently set by Thailand’s central bank.

The SSO will seek to allocate 12% of its portfolio to international equities within five years, while it also aims to double the number of employees in its investment division to 100 by next year. 

He added that the SSO’s equities mandates would be “primarily global”, although it may underweight the US and overweight Europe and Japan this year, if given the green light to invest in overseas stocks.

Mr. Win said that in terms of its fixed-income portfolio, the SSO did not “see much value” in global sovereign bonds in the current investment climate given low yields, but that it may pick up “some emerging market bonds and some corporates”.

He said that the SSO, which along with the Government Pension Fund (GPF) is one of Thailand’s two major public retirement savings managers, would initially rely on external fund managers for its global investment strategy.

“I believe that for the next two-to-three years, all of our global investments will be outsourced to external managers,” Mr. Win told Asia Asset Management.

The SSO currently relies on external asset managers for a 4% allocation to a domestic balanced fund and 3% for a global bond fund.

Its current allocations are 85% to domestic bonds; 10% to domestic equities; 3% in global bonds; and 2% to alternatives, including real estate, infrastructure and commodities. The fund currently returns about 4.5% annually, according to a recent Bloomberg article.

Like the SSO, the GPF is also looking overseas in order to boost its investment returns. In an interview with Bloomberg in May, the fund said it was boosting its allocations to foreign equities, in countries including India, Indonesia and the Philippines, amid domestic political upheaval.