The state-run Social Security System (SSS) on Thursday said it invested P3 billion of its investment reserve fund (IRF) in three domestic mutual funds in the Philippines, the first time in the history of the pension fund.
SSS President and Chief Executive Officer Emmanuel F. Dooc said the pension fund invested P1 billion each in PhilEquity Fund Inc as managed by Philequity Management, Inc.; Sun Life of Canada Prosperity Balanced Fund, Inc. as managed by Sunlife Asset Management Company, Inc.; and Philippine Stock Index Fund Corp. as managed by BPI Investment Management, Inc starting last June 27.
“This is the first time in 61 years that the pension fund invested in mutual funds. The deployment of P3 billion in domestic mutual funds, although modest in size relative to SSS' size of about P500 billion is a significant first step in partnering with top local managers and has a lot of potential benefits,” Dooc said.
“This is a big step for the SSS. This is a part of broadening its market-intelligence sources, discovering best practices and learning new investing styles that may be highly suitable to SSS. The competition brought about by performance-focused fund managers should result in improved total returns of the SSS funds,” he added.
Dooc added that the three mutual funds were chosen through a competitive and transparent evaluation process. The deployment of P3 billion was done in tranches from June 27 to July 4.
The Social Security Commission green lighted the accreditation of the three mutual fund companies on July 12, 2017 while the approval of the release of the P3-billion fund in six installments was on June 20, 2018.
“SSS’ investment in domestic mutual funds was made with due diligence and prudence in line with the basic principles of safety, good yield and liquidity,” Dooc said.
“The deployment is also a statement of confidence in the Philippine financial market. While the capital markets may be in its usual 3rd quarter weakness brought about by inflation concerns and global trade-war, and the longer-term view of at least two years, the SSS is confident that its deployment in the three mutual funds will be rewarding,” Dooc added.
Under Republic Act 8282 or the Social Security Act of 1997, the pension fund is allowed to invest its reserve funds “in domestic or foreign mutual funds in existence for at least three years, provided, that such investments shall not exceed 20 percent of the IRF."
The law also stated that investments in foreign mutual funds shall not exceed one percent of the IRF in the first year, which shall be increased by one percent for each succeeding year, but in no case shall it exceed 7.5 percent of the IRF.
SSS’ investment reserve fund as of end-March 2018 period stood at P498.633 billion wherein bulk of it or 41 percent is invested in government securities, 22 percent in equities, 17 percent in loans to members, 7 percent in bank deposits and corporate notes and bonds, and 6 percent in real estate.
Moreover, the SSS will soon start the bidding for outsourcing of nine local fund managers who will each manage P1-billion fund.
“Results will be published within 90 days after opening of bids. The winning bidders will be given notices to proceed after the procurement process is completed,” Dooc concluded.