GSIS in dire straits

This is something for everyone out there in the Philippines, to worry about. Their state pension fund, the GSIS (the "Government Social Insurance System) has been severely hit by the global recession. Signs of a Fannie and Freddie Mac? Probably. Filipinos should fire whoever heads this GSIS fund.

Crash pummels GSIS foreign portfolio
By Daxim Lucas
Philippine Daily Inquirer
First Posted 02:58:00 10/18/2008
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MANILA, Philippines—The state-run pension fund Government Service Insurance System (GSIS) may have incurred more losses due to the sharp decline in stock prices around the world in recent weeks, an examination of its portfolio of stock holdings revealed.

The “global property securities” held by the GSIS also showed marked drops in their values in the weeks following the GSIS declared profits from its overseas investments.

One particular investment — in Helsinki-listed Citycon OYJ — showed an 85-percent drop in its value since the GSIS began its foreign investment program. Other property investments, such as in Brazil’s BR Malls Participacoes SA and Singapore-based property fund Capitamall Reit, showed declines of over 50 percent.

At the height of the global stock market meltdown last week, some of the GSIS holdings in its global investment program (GIP) lost more than three-fourths of their value, according to published stock prices.

The biggest losers in the GSIS portfolio included UK-based consumer credit firm Cattles Plc, which lost 77 percent of its value, Singapore-listed real estate investment fund CDL Hospitality Trust (down 71.7 percent), New York-listed Allied Irish Bank (down 73.8 percent) and the Royal Bank of Scotland Group (down 76.2 percent).

Other large losers included Singapore-based manufacturer Hong Leong Asia Ltd. (down 69.7 percent), China Coal Energy (down 65.7 percent) and the world’s biggest telecommunications firm China Mobile Ltd. (down 45 percent).

The GSIS has said it had acquired 123 stocks under the GIP. It listed its holdings in a paid advertisement published last week.

The GSIS earlier announced that its foreign investment activities began around April.

A survey of the performance of GSIS’ stocks showed that the prices of at least 82 stocks retreated in value from April 1 to Sept. 30, 2008 — the cut-off date for the pension fund’s published report — and only 15 stocks registered gains.

During this period, at least eight stocks lost more than half their value, with Cattles Plc performing the worst. Eleven other stocks on the GSIS portfolio lost between 30 and 40 percent during this period, and at least two stocks showed double-digit gains.

Earlier this year, GSIS allotted $600 million for foreign investments to be managed by ING Investment Management and Credit Agricole Asset Management.

GSIS president and general manager Winston Garcia earlier said the recent declines in stock markets around the world presented the pension fund with fresh buying opportunities. He said the investments were long-term in nature.

Its published investments last week also showed the GSIS earned the bulk of its declared gains from foreign exchange fluctuations — a result of the weaker peso against the dollar in which the investments were denominated.

The GSIS said it had earned P1.4 billion as of the end of September from an initial investment of P25.12 billion, for a return of 5.65 percent.

When computed in dollar terms, the figures showed that the pension fund may have incurred losses of as high as $48.9 million, or about P2.33 billion, using the latest foreign exchange rate.

In dollar terms, the GSIS may be actually losing eight percent as against a five-percent gain in peso terms.

As of late Friday, GSIS officials had yet to respond to the Philippine Daily Inquirer’s requests for clarifications on its foreign investmen