State-run pension fund Social Security System will hire three local fund managers by the third quarter in line with plans to hike its investments in domestic capital markets.
SSS president and chief executive Emilio S. de Quiros Jr. said the agency’s bids and awards committee would come out within the next three months with the result of the bidding for the contract that started in November 2014. This will be the first time that the SSS would tap fund managers.
Each of the three local fund managers will handle P1 billion in investible funds to be allocated into a mix of equity and fixed income securities, according to de Quiros.
“We can take advantage of their skills in investment, and also compare their performance in relation to our performance. It’s a solid benchmark that’s important to us,” de Quiros said.
The SSS official said the three local fund managers would each have two-year contracts. “We’ll give them two years, then we’ll look at their performance, the worst of which we will replace with another one,” he said.
After gaining experience with local fund managers, the SSS may also tap foreign fund managers in the near-term, de Quiros said, adding that such could be done when the next administration comes in.
“We now have a fund of about half a trillion pesos; it’s becoming significant. As an investment office, you need to diversify your investments,” he pointed out.
SSS saw its end-April net revenue inch up to P15.2 billion, as the rise in contribution collections compensated for slightly lower investment gains.
De Quiros said the SSS expected net revenues by the end of the year to match or even exceed last year’s P44.5 billion.
The SSS initially targeted only P40 billion in net revenue for 2015—lower than the previous year, but they have become more confident as the four-month figure was 0.5-percent higher than the P15.1 billion in the first four months of 2014, de Quiros said.
The SSS official attributed their slow growth thus far mainly to lower investment and other income, which slid by 1.7 percent year-on-year to P11.7 billion at end-April.
“The rates are down and the stock market is a bit on the downside so our investment income was not as much as last year,” he noted.
End-April contribution collections from the SSS’ about 32 billion members nonetheless rose by 9.7 percent to P42.7 billion from P38.9 billion last year, bringing total revenues to P54.4 billion.
Expenditures as of end-April amounted P39.1 billion, up 9.8 percent from P35.6 billion a year ago, as both benefit payments and operating expenses increased to P36.6 billion and P2.6 billion, respectively.
Meanwhile, de Quiros said the pending legislation aimed at jacking up the monthly pension by P2,000 would slash the fund life by 13 years.
It means that from the existing life of the SSS fund lasting until 2042, an across-the-board increase in remittances to about 1.9 million pensioners would make the fund last only until 2029.
Since the Lower House early this month approved the bill on second reading, de Quiros said they are mulling over options to maintain the life of the SSS fund.
“We’re always evaluating options… If we can afford additional increases [in the contribution rate], we will do so,” de Quiros said.
According to de Quiros, a rate hike to 15-16 percent from 11 percent at present would compensate for possible losses from higher pension. “The workers will have to shell out more.”
The SSS earlier said it was also looking at hiking the statutory cap for contributions.
Citing its latest actuarial valuation, the SSS had noted that its fund life was extended by four years to 2043 from 2039 previously when the higher contribution rate as well as monthly salary credit ceiling were implemented in January last year.
However, since SSS pensions were increased by 5 percent last year, the fund life was rolled back by one year, now projected to last in 2042.