Labor group cautions GSIS vs investing $400M more abroad

MANILA, Philippines - Former Senator Ernesto Herrera, secretary general of the Trade Union Congress of the Philippines (TUCP), warned on Tuesday the Government Service Insurance System (GSIS) against prematurely investing an additional $400 million overseas. The former lawmaker warned that the global financial crisis "could worsen in the months ahead before conditions start to recover." Herrera issued the warning a day after the parent firm of one of the foreign fund managers of the GSIS was bailed out by the Dutch government via a massive capital injection. The Netherlands' ING Groep NV, one of the world's top 20 diversified financial services firms, got a $13.4-billion capital infusion from the Dutch Treasury on Monday. A unit of ING Groep NV - ING Investment Management - is one of the two foreign fund managers of the GSIS's $600-million Global Investment Program (GIP) portfolio. The GIP's other foreign fund manager is France's Credit Agricole Asset Management Ltd. "While ING's internal financial condition may not directly impact client accounts, such as the GIP portfolio that it is managing on behalf of the GSIS, this nonetheless casts doubt on the reliability of the investment decisions being made by ING's fund managers," Herrera said. "Our sense is, an institution that cannot prudently manage its own investments or finances cannot be totally trusted to skillfully look after other people's funds, or in this case, the money of GSIS members and pensioners," said Herrera, former chairman of the Senate labor, employment and human resources development committee. ING on Monday said it expects to report a net loss of $670 million for the third quarter -- the firm's first in 50 years. The company blamed the loss on $2.68-billion worth of investment losses, asset write-downs and extra provisions for bad loans. At the New York Stock Exchange, ING's own stock has plunged from a high of $45.21 a year ago to as low as $9.89 this month. In return for the huge cash investment, the Dutch government received new ING shares representing 33-percent ownership of the Amsterdam-based global banking and insurance giant. The GSIS previously reported that its P26.54-billion ($553 million at P48:$1) GIP portfolio is invested in global fixed income instruments (P10.456 billion); global equities (P4.127 billion); global property securities (P3.08 billion); and cash, short-term notes and other investments (P8.875 billion). With global stock markets hovering at or near five-year lows, the GSIS earlier said it intends to start "bottom-feeding" by buying even more equities at fire-sale prices. Herrera, however, warned that a deep recession or a prolonged and severe economic slump in the US and Europe could further drag global financial markets down. "Most global fund managers are now staying very liquid and keeping their money in short-term cash, precisely because at this point, they still do not see any light at the end of the tunnel. The GSIS would do well to follow suit," Herrera said. With 113,000 employees worldwide, ING provides banking, insurance and asset management services to more than 60 million customers in over 50 countries. The firm also operates ING Direct, one of the world's largest Internet-only banks. ING Direct USA reported significant exposure to bad home loans. - GMANews.TV