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THE
Government Service Insurance System (GSIS) and the
Social Security System (SSS) should “go slow” on their
plans to stash overseas up to P63 billion of their
investment funds, according to the Senate economic
affairs committee chairman.
Instead,
said Sen. Loren Legarda, they should carefully assess
long-term prospects first and take a leaf from the
current experience of “first-rate” global financial
advisors that have lost, in the US mortgage crisis,
billions of dollars entrusted to them.
“We
recognize that the GSIS and SSS may consider this a good
time to start investing overseas, both as a
diversification strategy and to further enhance returns
for the ultimate benefit of pensioners and members,”
Legarda conceded, but urged officials looking to reap
the benefits of the strong peso for their members to
look at the longer-term prospects.
With the
powerful peso, Legarda said the GSIS and SSS would now
be able to buy dollar-denominated foreign assets for
fewer pesos. “But then again, some analysts see the peso
appreciating by another 50 percent over the next 24
months, to P30 to a dollar. So two years from now might
be an even better time to accumulate dollar-based
holdings,” Legarda said.
In fact,
had the GSIS and SSS hastily invested in dollar-based
assets abroad when the peso was 55 to a dollar, Legarda
said the two state-run pension funds would have been
reeling from huge foreign-exchange losses by now,
considering the peso’s 20-percent surge against the US
currency.
The peso
closed at 44.75 to a dollar on Friday.
“We also
have to keep in mind that any GSIS and SSS investments
overseas will eventually have to be converted back to
pesos, because the money is meant to pay for future
benefit obligations to members and pensioners,” Legarda
added.
Last
week, French banking giant BNP Paribas boldly forecasts
that the peso would continue to rise steadily versus the
US currency, and reach 30 to a dollar by the end of
2009.
The GSIS
earlier said it intends to embark on a $1-billion
(P45-billion) global investment program, while the SSS
said it would pursue a similar plan worth $416 million
(P18.7 billion).
Legarda
does not oppose the planned overseas investments per se,
except that the two pension funds “should first clearly
establish adequate controls and transparent safeguards
against potential abuses and high-risk investments.”
She will
file a resolution “and ask the appropriate Senate
committees to look into the foreign investment programs
of the two pension funds, in order to ensure that the
hard-earned contributions of their members are fully
protected.”
The
Senate economics panel chief observed that global
financial markets of today are not the same as five to
10 years ago. “There are so many ‘hidden’ risks
nowadays, partly on account of the emergence of so many
new interrelated financial products,” the senator said.
In the
past, Legarda warned that overly aggressive global fund
managers of highly reputable institutions have lost
billions of dollars entrusted to them.
To
execute their global investment programs, the GSIS and
SSS said they plan to engage the services of foreign
asset managers.
Since
September, global financial services giants Merrill
Lynch Co. Inc., Citigroup Inc., Goldman Sachs Group
Inc., UBS AG, Bear Stearns Cos. Inc., Morgan Stanley,
Deutsche Bank AG and Lehman Brothers Holdings Inc. have
written off billions of dollars due to their exposure to
the US subprime mortgage market crisis that swiftly
turned global.
“A year
ago, who would have thought that these first-rate
financial institutions backed by supposedly brilliant
investment strategists and fund managers are capable of
losing so much money so quickly?” Legarda asked.
Two
European banks also collapsed last month as a result of
their exposure to the US subprime mess. |
