Thailand’s Government Pension Fund, which manages about $17.5 billion of assets, is planning its first investments in U.S. and European commercial properties for higher returns than those generated from domestic bonds.
The country’s third-biggest money manager will spend about $250 million this year buying the properties, Sopawadee Lertmanaschai, the agency’s secretary general, said in an interview at her office in Bangkok yesterday. The fund is selecting companies for advice on these investments, she said.
The Thai state pension fund shifted its investments into overseas equities, commodities and debt this year from domestic bonds, its biggest holding, to boost the return amid accelerating inflation in Southeast Asia’s second-biggest economy. It also hired Pacific Investment Management Co., MFS Investment Management and seven other companies to manage the agency’s $1.5 billion investments in global bonds and equities.
“The stagnate economic environment in the U.S. and Europe offers a great opportunity for property investments because of attractive prices,” Sopawadee said. “Global property investment is our strategy to become more aggressive and dynamic in boosting returns for our pensioners.”
The initial purchases will raise the holdings of global properties to about 1 percent of its total assets from none at the present, she said. The pension fund has cut its investments in domestic bonds to 65 percent of total assets in 2012 from 69 percent last year, she said.
Commercial Property Investments
Commercial property investments globally rose 14 percent in 2011 to $727 billion, or $808 billion including multifamily properties, Cushman & Wakefield said in February, with volumes up 83 percent from 2009.
Thai inflation rate this month climbed to 3.45 percent, a three-month high, on rising oil prices, the commerce ministry said on April 3.
The pension fund, which manages retirement savings for about 1.2 million state employees, aims to earn a return of 1.5 percentage point more than the domestic inflation rate, Sopawadee said.
The fund will also invest more in bonds of emerging markets, whose faster economic growth than developed nations will offer better returns, she said. The agency, which has about 10 percent of its assets in global debt securities, this year bought Malaysian and South Korean bonds for the first time, she said.
“Over the next few years, we will increase our investments abroad to diversify the risk,” she said. “Commodities, properties and infrastructure investment will give a stable return in line with inflation rate.”
Thai equities may drop between April and May as overseas investors are expected to sell after the recent rally. The pension fund invests about 10 percent of assets into the domestic shares, she said.
The SET Index (SET) gained 16 percent in the first three months this year, the biggest quarterly advance in 1 ½ years as overseas investors bought a net $2.7 billion baht of Thai equities, according to the Stock Exchange of Thailand’s data.
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