GPF to shift weighting towards global assets

The Government Pension Fund (GPF) plans to raise its foreign investment limit to 30% of portfolio assets next year from the current 25%, with expectations of a higher annual return of 4-4.5%.

The GPF expects a key US interest rate to rise to 1% by early 2016 as the local rate holds steady until the end of next year, said secretary-general Sombat Naravutthichai.

“The US currency is expected to gain, but it shouldn’t affect US equities much because the markets have been absorbing the sentiment from this news in advance,” Mr Sombat said.

The GPF sees an opportunity to gain from a stronger US dollar.

The fund currently parks money in safe assets such as short-term and government bonds (47% of the portfolio), followed by local and global corporate bonds (17.4%), assets that correlate with inflation such as properties, commodities and infrastructure (8.50%) and growth assets (27.10%).

The GPF wants to increase investment in global assets such as properties, infrastructure and equities.

Next year’s plan calls for cutting the proportion of safe assets to 44.5% and the share of growth assets to 23.5% to free up room for foreign assets.

Bonds and absolute return funds will rise to 21.6%, and inflation-sensitive assets will make up 10.5%.

For local equities, the GPF will focus only on sectors with sound fundamentals such as tourism.

“We expect Thailand’s GDP to grow by 3.5% next year, but it is still fragile,” said deputy secretary-general Yingyong Nilsena. “The Thai bourse will remain volatile in line with domestic and global factors.”

Mr Yingyong estimates the SET index in a range of 1,500 to 1,550 next year, with the GPF likely to gain between 4% and 4.5%.

For the first 10 months of 2015, the GPF reported net assets under management of 708 billion baht. The return for those 10 months was 3.59%.

“Local investment faced a highly fluctuating environment,” Mr Sombat said, citing events such as the Ratchaprasong bombing in August.