The Philippines’ state-run Social Security System (SSS), a pension fund for private sector employees, is eyeing co-investments in brownfield infrastructure projects with Maharlika Investment Corporation, the Southeast Asian country’s sovereign wealth fund.
The move comes as Finance Secretary Ralph Recto is encouraging the SSS and the Government Service Insurance System (GSIS), a pension fund for government employees, to co-invest with the wealth fund to help in nation-building.
Recto, who chairs Maharlika, expressed his hopes to Asia Asset Management (AAM) when asked if the SSS and GSIS might be injecting their hundreds of billions of pesos in investible funds into such co-investments.
“Of course, that’s a possibility,” he says.
The pension funds were listed among the sources of capital for Maharlika in the first version of legislation to establish the wealth fund, introduced when President Ferdinand Marcos Jr. became the Philippine leader in 2022. But it was widely opposed and the funds were dropped as capital sources in the final legislation.
The 125 billion pesos (US$2.2 billion) of initial capitalisation for Maharlika came from the central bank and two state-owned lenders.
Recto, who spoke to AAM when he attended the signing of a memorandum of agreement between Maharlika and the Bases Conversion and Development Authority (BCDA) on April 29, says the pension funds’ potential co-investments should ideally be in “anything that will help develop the economy and improve our infrastructure”.
SSS President and Chief Executive Officer Rolando Macasaet was enthusiastic about the suggestion and says he is “looking forward”, but GSIS President and General Manager Jose Arnulfo “Wick” Veloso was more cautious.
Veloso tells AAM that GSIS may partner in projects already being undertaken by the BCDA, which raises revenues from the development and sale of military assets. BCDA’s agreement with Maharlika covers investment opportunities in five projects within its properties, mostly at Clark Freeport and Special Economic Zone, a former US military base.
Meanwhile, Macasaet says he will meet with his Maharlika counterpart Rafael “Joel” Consing Jr. next week.
“I’m really willing to co-invest with them [the wealth fund] in ‘brown’ projects. Because we’re a pension fund, we can’t invest in projects that entail cash flow,” he says in an interview with AAM.
According to Macasaet, brown or existing projects would lower or even totally eliminate construction risks in infrastructure projects in which the SSS might invest.
“For example, we can buy an existing toll road – it’s allowed. There really are many projects where we can partner. I’m looking forward,” he says.
