State-run Government Service Insurance System plans to double its investments in infrastructure projects in the Philippines to $800 million, the agency’s top official said over the weekend.
GSIS president and general manager Robert Vergara said participating in infrastructure projects would be a good investment that would generate better returns for the pension fund.
GSIS manages the pension fund of nearly 2 million government employees, public school teachers, court employees, military and police personnel nationwide.
Vergara said the infrastructure investment of the fund was currently at 2 percent to 3 percent of total investment portfolio, or about $412 million.
“I really think investing in infrastructure in the Philippines is based on our experience. It’s a certainly a very good asset, generates returns that we need. So certainly, I will be recommending that we explore the possibility of increasing our allocation to infrastructure,” he said.
“I think we can easily double the position, take it to 5 percent. If you look at the other sovereign wealth funds or other pension funds, their allocation to infrastructure is 10 to 15 percent, so certainly the empirical evidence is this is something that deserves an allocation,” he said.
Vergara said the fund was interested in investing in core infrastructure projects such as power, transportation and fuel depots.
GSIS earlier said 76 percent of the $412 million it committed to Philippine Investment Alliance for Infrastructure in 2012 had already been invested.
GSIS teamed up with Asian Development Bank, Dutch pension fund manager Algemene Pensioen Groep and Australia’s Macquarie Group to set up the $625-million Pinai fund in 2012 to finance infrastructure projects in the Philippines.
GSIS allocated $412 million for the program while ADB provided $25 million. APG and Macquarie raised the remaining $200 million while Macquarie Infrastructure and Real Assets was tasked to manage the infrastructure fund.
Vergara said the past three years was a learning period in infrastructure investment in the country. “I think that the learning period [in infrastructure investment] has been very favorable, so i think we will probably make a recommendation,” he said.
Vergara said with interest rates expected to increase following the US Federal Reserve’s action, it would be more risky to increase the fund’s fixed-income allocation.
“It also diversifies our risk at a time when interest rates are supposed to be rising, so increasing our fixed-income allocation looks like not a very opportune asset to invest in,” he said.
