ING Barings, 2 others eye portfolio for GSIS consultant

The Government Service Insurance System (GSIS) will be selecting a consultant from a list of four to five firms that will make a shortlist of foreign fund managers to handle millions of dollars worth of its investment reserves.

Already in the checklist of consultants are Smith Barney, ING Barings, and Merryll Lynch.

The government pension fund will be investing up to $200 million (roughly P10 billion) in the global capital markets. At the start of the year, the government pension fund has P181 billion in reserves.

GSIS president and general manager Winston Garcia said "we would like to hire a reputable consultant that would take care of making shortlist of the best fund managers in the world."

However, Garcia pointed out that the consultant is different from the foreign fund manager despite the possibility of an overlap. Firms like ING Barings have both services as consultant as fund manager.

"They must be different so that GSIS will be hiring two firms to take care of the government employees money," the general manager said.

"The international fund managers must be among the world’s top 10 best who will handle our investments in the global market. I prefer them because they have the wealth of knowledge, a reputation to protect, the worldwide network, the facilities, knowledge on where to invest, and the like," Garcia told The STAR.

Likewise, investments must not be limited to just one geographic market. If it was necessary, the pension fund is open to infusing more investments depending on how the first investments are performing.

"I can start with a $100 to $200 million and then assess their performance on a yearly basis. But I want a diversity not only of risk but also of geographic risks," Garcia said.

The GSIS general manager is wary over the local capital markets and the local fund managers.

"It is about time that the pension fund should be handled by professional foreign fund managers."

Meanwhile, the Social Security System (SSS) is working on a $100-million joint venture with an international fund manager to manage its investment funds amounting to over P165 billion.

SSS president and chief executive officer Vitaliano N. Nañagas II pointed out that the fund manager must be prepared to invest up to $50 million to the joint venture and that it must be based in the Philippines even if it is a foreign-controlled fund manager.

"We will also insist that all the investments will be made in the Philippines. I want the fund manager to be Philippine-based," Nañagas said in a press briefing over the weekend. "My clients are local, I don’t even have to hedge. I don’t have liabilities in assets so why should I have liabilities in dollars."

The SSS chief revealed that a shortlist of candidates already exists and that "so far, we have one who is already ready to infuse equity into the joint venture." Under the plan, the fund manager will be both the custodian and strategic partner.

"We are not only paying them to manage our funds, but they will also have to bring in their money. So that the fund manager and partner would be managing a $100-million fund."

The joint venture would expand their opportunities to increase the reserve fund of its members. It will also allow the System to concentrate on its core business of extending benefits to its 21 million members nationwide.

"The SSS wants to have professionals to manage our funds. Likewise, we want to find out if there are others who can do a better job," Nañagas said. "One reason for hiring an external fund manager is that we get to learn."

Last year, the pension fund invested nearly P165 billion in various products with its average return hitting a decent 7.4 percent. These were placed in marketable securities in the capital markets, housing loans, member loans, business loans, real estate, and loans by the government sector.