High baht cuts fund's return from overseas

The Nation (27 November 2007)

Returns from investments in foreign markets have been marginalised by the appreciation of the baht, says Somkiat Chayasriwong, chairman of the Government Permanent Employee Registered Provident Fund (GPEF).

However, yesterday he announced the fund's overall return on investments in the first nine months of the year was 7.15 per cent, a figure he called "satisfactory". Somkiat was speaking at a seminar marking the GPEF's 10th anniversary.

The fund's total investment portfolio amounts to Bt10.45 billion. Eighty-five per cent is invested in the bond market and 15 per cent in the stock market. Under its investment strategy, only 5 per cent of the fund's assets have been placed in foreign bond and share markets.

"From foreign investments, we've not seen a clear sign of good returns, because the strengthening of the baht has offset returns," he said, adding that the GPEF had not invested in sub-prime collateral debt obligations in the US market.

The GPEF is currently studying new investment strategies, in order to diversify its investments, probably by investing more abroad or more in the property sector, he said. But the decisions will be left to a new GPEF board, and in any case they will place priority on fund stability.

Returns from the GPEF's investments in bonds between January and September grew 48.63 per cent year on year, while its returns from stock-market investments in the same period jumped 51.37 per cent, he said. The fund's overall return was 7.15 per cent. Over the decade it has been in operation, the GPEF's average overall return has been 6.62 per cent per year, compared within inflation of 3.05 per cent and an average bank interest rate of 3.57 per cent.

Somkiat said 161,197 out of 220,000 permanent government employees were members of the fund. "We'll persuade more government employees to participate," he said.

He said under the new Constitution, the government was required to facilitate the establishment of national savings pools for the elderly. If, because of this provision, the new government required private companies to set up new national saving pools, the GPEF would also create a new savings fund of its own.

The GPEF is not a part of the Government Pension Fund (GPF), which manages government-staff savings assets worth more than Bt400 billion.

Provident Fund Association president Pisit Lee-ahtam told the seminar that the GPEF should diversify its investments and look for opportunities in foreign financial markets. He suggested higher-risk investments with higher returns be offered as an option to some GPEF members. Compared with the GPF, which provides benefits for government officials, the GPEF offers fewer benefits to its members, Pisit said.

ING Funds Management managing director Maris Tarab and Finansa Asset Management chief investment officer Monchai Jaturanpinyo, representing the GPEF's two fund managers, told the seminar that the GPEF should invest more in stock, property and foreign markets.