Business News - Tuesday December 18, 2007
Government Pension Fund returns set to drop next year
Plans to invest more in foreign countries
The Government Pension Fund projects returns to drop to 6% to 6.5% in 2008 from 8% to 9% this year, according to secretary-general Visit Tantisunthorn.
"Next year it will be very difficult to match returns with those of this year, not when inflation is expected to rise to 3.5% to 4% in 2008 compared with 2.2% this year," Mr Viset said.
The GPF, the country's largest institutional investor, was expected to post 8% returns for this year thanks to strong returns on equity investments and a pickup in the fixed-income market.
The fund, which manages pension assets on behalf of the civil service, plans to increase its overseas investments in anticipation of rising interest rates in the local market.
At the end of September, the GPF had assets under management of 375 billion baht. Of those, 67% were investments in domestic bonds, 3.37% alternative investments, 3.87% property, 12.37% Thai stocks and 12.36% foreign assets.
Mr Viset said the GPF would also ease its weighting of the energy sector as current prices were near their peak.
"This year, we overweighted energy stocks, but for next year, we expect to review our positions given that current prices look to have peaked," he said, adding that the sharp run-up in global energy prices this year and slowing US economy were key signals pointing to a correction in 2008.
The GPF planned to increase its focus on domestic consumption stocks in 2008 in expectation of a pick-up in the local market following the Dec 23 election.
"We should start to see clear signs in January or February. We may not necessarily increase our weighting on Thai stocks, but will look to diversify our investments, including foreign investments," Mr Viset said.
The GPF planned to increase its Asian equity investments in 2008 from to 20% to 25% of the fund's foreign stock portfolio from 15% now.
A US economic slowdown was expected to have only a minor impact on Asian economies and equities, he said.
The GPF also planned to increase investments in cross-border property funds.
Domestic property funds were still relatively small and unsuited for an institutional investor of the GPF's size, Mr Viset said.