GSIS plans to sell P12.7B worth of acquired assets

The Government Service Insurance System (GSIS) is planning to sell about P12.7 billion worth of acquired assets as the state-owned pension fund consolidates its investments ahead of losses arising from delinquent contributions.

GSIS officials said the pension fund was juggling its resources to higher-yielding investments in the face of declining interest rates that could affect its returns over the short term.

GSIS executive vice president Reynaldo Palmieri said over the weekend that part of the fund’s consolidation would involve the sale of over P12 billion worth of assets including real property and stocks.

Palmieri did not disclose which specific assets the GSIS had decided to sell but said the main objective was to maximize returns on investments.

The decision to sell, Palmieri said, would accompany GSIS’ earlier decision to diversify its investment portfolio both in terms of holdings and in terms of geographical distribution, marking the fund’s first foray into the international market.

GSIS had initially earmarked at least $200 million for possible off-shore investments after years of locking its funds in low-yielding domestic instruments, mostly government securities.

Palmieri said GSIS’ investment portfolio was very heavily invested in the domestic market, specifically in government securities and various other government debt papers.

At present, Palmieri said GSIS’ total assets were estimated at P311 billion, excluding receivables from the National Government which were considered off-balance sheet items.

Palmieri said the GSIS board has already decided to put at least $200 million in a foreign fund manager that would in turn invest its funds on selected investment instruments.

"We are in the process of drawing up the investment parameters and principles that would guide our investment decisions when we embark on this," Palmieri said, adding that GSIS was now looking for a financial adviser to help the board select the fund manager.

"We want to diversify in terms of instruments and geographical spread," Palmieri explained. "Our charter allows us to invest about 10 percent of our investment portfolio in foreign-denominated instruments, we just haven’t done it before."

Palmieri said the GSIS was being constrained by the narrow yields in the domestic market and putting its funds in off-shore investments would help the pension fund maximize its resources.

"The problem is that we are over-exposed in the National Government and there isn’t much activity in the stock market," Palmieri said. "One way to beef up the fund without raising premium contributions is to make investments that would generate high returns."

Palmieri said the board will draw the investment parameters that would include investment principles and standards based on the provisions of its charter.

For 2005, Palmieri said the GSIS was projecting its gross revenues to reach P75 billion. Net of claims by members, the net revenues was expected to reach P38 billion of which around P28 billion would come from investments.

Net revenues from both premium payments and investments were recorded at P36.5 billion in 2004 and P35.6 billion in 2003.