GSIS hikes stocks investments by P87 B

MANILA, Philippines - State-run Government Service Insurance System (GSIS) is beefing up its stock market war chest by at least P87 billion by raising the cap of its equity exposure by another 10 percentage points within the month.

GSIS president and general manager Robert Vergara said the pension fund manager expects the green light from its board of trustees to raise the cap on equity investments to 30 percent of its total investible fund from the current level of 20 percent.

 “We just presented to the board requesting an increase in our total equity exposure to 30 percent from where it was before. I think the board understands that we need to really deploy in higher yielding investments,” Vergara said.

Vergara told reporters GSIS has a total investible fund of about P874 billion.

Of the total amount, about 47 percent or P409 billion are invested in fixed-income, while 25 percent or P217 billion are in the form of loans extended to members.

On the other hand, about 18 percent P158 billion are invested in the stock market and 3.4 percent or P31 billion are invested in real estate.

According to him, GSIS has cash amounting to P57 billion.

“Currently, our investible portfolio is about P874 billion, so with the additional 10 percent we are talking about P87 billion.

However, he clarified GSIS would not foray the entire amount into the stock market immediately.

 “It does not mean we will go straight to the market. We don’t telegraph our moves that obviously. Like in the past we will pick our moments. When the markets are vulnerable and people want to get out we will step in and buy those stocks that have long term growth stories,” Vergara said.

Vergara said the pension fund manager almost breached the equity investment cap of 20 percent two or three months ago after the Philippine Stock Exchange index (PSEi) reached a new all-time high. The PSEi hit a fresh record of 8,127.48 last April 10.

He pointed out the level stayed below 20 percent or at about 18 percent recently due to the stock market pullback.

 “We don’t want to worry about that limit but we also want to be able to buy as the outlook improves,” he said.

Vergara said GSIS recorded a net income of P29.6 billion in the first half of the year, 68 percent lower compared to P94 billion in the same period last year.

The GSIS chief attributed the huge decline to the non-recurring gain of P65 billion last year because of a shift to fair value accounting of financial assets.

 “The P65 billion drop is not really a year-on-year drop because last year we classified all our held to maturity portfolio at market value,” he said.

On the other hand, he said revenues likewise fell 48 percent to P70 billion from January to June this year compared to P135 billion in the same period last year.

“That year-ago figure of P135 billion did have a P65 billion reclassification one-off. If I strip out that one-off, we are slightly down,” he said.

The fair value accounting shift of its financial assets boosted the net income of GSIS to P139.9 billion in 2014 from P44.3 billion in 2013, while revenues jumped to P231.5 billion from P135 billion.

Vergara said the earlier projected P65-billion income target for this year would be difficult to achieve especially if the government’s gross domestic product (GDP) growth target of seven to eight percent is delivered.

The GSIS chief said the pension fund manager is more concerned about its ability to generate more revenues from other sources as both the equities and fixed income markets continued to underwhelm.