GSIS gives mandate for $1-B foreign fund

BY GERARD S. DELA PEÑA/BUSINESSWORLD AFTER A MONTH of review, state pension fund Government Service Insurance System (GSIS) has awarded the mandate to manage its $1-billion global investment program to ING Investment Management and Credit Agricole Asset Management (Singapore) Ltd. The GSIS board of trustees deemed ING and Credit Agricole to have the best credentials and investment proposal among the nine global fund managers that vied for the mandate to manage GSIS’ global investment program. "The GSIS board feels ING and Credit Agricole best satisfied our criteria, anchored on competitiveness and transparency, and offered the best proposals relative to our investment program," GSIS President and General Manager Winston F. Garcia said in a statement. The GSIS has set an absolute return requirement of at least 8% annual return on investments, net of fees, and a ceiling of 7% on the portfolio volatility. ING, which has had a presence in the Philippines since 1990, has around $503 billion in assets under management. The asset allocation it has proposed under the program includes a mixture of global high dividend, global property securities, global fixed income, and alternative investments. Credit Agricole has about $725 billion worth of assets under management and has been given a fund manager rating of M2 by Fitch Ratings, indicating stability, well capitalized investment management, and a track record of profitability. Credit Agricole is the fourth largest banking corporation in the world and topped other banks in France in terms of Tier 1 capital. The company is also a pioneer in absolute return strategy in Europe. The asset portfolio it has proposed to the GSIS consists of global bonds, Asian equities, global equities fund, and cash equivalents. While the state pension fund initially allocated two fund management slots for its program, there is still a possibility that more asset managers will be named in the future, Mr. Garcia said. The other asset managers that contended for the GSIS program include BNP Paribas, Credit Suisse Asset Management Ltd., Deutsche Asset Management, Northern Trust Global Investment, Pacific Investment Management Co., Goldman Sachs and Societe Generale. "All other short-listed candidates may be considered for future mandates. We’ll make an announcement, if any, at the appropriate time," Mr. Garcia said. Meanwhile, the GSIS is set to announce the global custodian for the billion-dollar fund once it finishes its review of the proposals submitted by State Street Bank and Trust Co., Citibank N.A. and JP Morgan Chase N.A. (Hong Kong). The $1-billion budget for the global investment progam is equivalent to about 12% of the total loans and investment portfolio of the GSIS. The pension fund said it had decided to invest abroad so that it can meet the future claims and benefits of its members. It earlier said the program is consistent with investment practices of public pension funds like the California Public Employees’ Retirement System and the California State Teachers’ Retirement System. The same tack is used by the pension funds of other Asian countries, including the National Social Security Fund of China, Government Pension Fund of Thailand, and Employees’ Provident Fund of Malaysia.