GSIS ready to invest $350M in 2nd infra fund

MANILA, Philippines–State-owned pension fund Government Service Insurance System (GSIS) is committed to invest more in Philippine infrastructure and equities to diversify its portfolio while supporting the country’s quest to sustain its growth momentum.

In the CFA (Chartered Financial Analysts) Summit on Wednesday, GSIS president Robert Vergara said he was expecting the $625-million infrastructure fund spearheaded by the GSIS to be fully invested in the next 18 to 20 months. At present, half of the fund has been deployed.

Vergara also talked about the GSIS possibly investing $300 million to $350 million in a second infrastructure fund after fully investing the first.

In an interview at the sidelines of the forum, Vergara explained that when the pension fund was working on the first infrastructure fund in 2012, investible funds were only about P550 billion. Now that investible funds have grown to P900 billion, Vergara said this meant the GSIS could easily deploy another $300 million to $350 million.

In 2012, the GSIS spearheaded the creation of the $625-million Philippine Investment Alliance for Infrastructure, which is managed by Macquarie Infrastructure and Real Assets (MIRA), a division of the Macquarie Group. The pension fund contributed $400 million to the first fund.

For GSIS, he said investing more in infrastructure would be a very good diversification opportunity.

“In terms of shortage in infrastructure, I got to think that a lot of capital is going to real estate and other asset classes. That means infrastructure should retain its appeal for long term money that we and other insurance companies are attracting,” Vergara said.

In the same forum, Michael Manuel, the Hong Kong-based Filipino managing director for Asia investments at Sun Life of Canada, said his company was looking at how to participate in Philippine infrastructure space, particularly in the power generation and tollroad sectors.

Asked whether he was disappointed that only half of the first infrastructure fund had been deployed so far, Vergara said that considering the stumbling blocks encountered by the public-private partnership (PPP) program, he was not totally surprised.

“Two years ago, I said let’s not focus much on PPP. Let’s look at the other private deals that a lot of other corporations are looking at, such as power plants. We were able to do some deals there and their pipeline is actually good,” he said.

Since then, the GSIS-led fund has invested in the coastal oil pipeline from Subic and in the consortia behind a wind farm project in Ilocos and the Light Railway Transit 1 extension.

From the start, Vergara said the investment horizon was really supposed to be through a three-year period but with an option to add another year and a final year to be fully invested.

“There’s so much going on right now. We’re looking at a few LNG (liquefied natural gas-fired power plant) opportunities,” he said.

The GSIS, which has reclassified its investments based on mark-to-market valuations, now has 45 percent of its investible funds in bonds. The goal is to increase the share of equities in its portfolio to 20 percent from 17.5 percent, adding that the Philippine economy and asset markets were still in a “secular” upswing. “When the market dropped, we were adding to our holdings,” he said.

In terms of the physical market, however, Vergara said the GSIS was currently a “seller rather than a buyer” given lofty valuations.

In terms of sectors, he said banking was still an interesting sector alongside high dividend-yielding stocks like utilities.