SSS reveals plan to invest $1 billion abroad

SOCIAL Security System President and CEO Emilio S. de Quiros Jr. aims to optimize the actuarial life of the pension fund beyond the estimated 15-year stretch the organization enjoys at the moment by deploying more or less $1 billion of its investment portfolio overseas.

The former banker and current fund steward bared the plan on Tuesday at The Roundtable Forum hosted by the BusinessMirror, where he said this will be the first time the pension system will deploy a portion of its investment portfolio outside the country.

“We are not prohibited by our charter to do just that,” de Quiros said. The proposal requires Malacañang’s approval, and has yet to be acted on by the fund’s own investment-deployment managers, but comes at a time when investing overseas has the potential to reward handsome benefits for the fund’s 1.9 million members.

Global interest rates were seen moving up toward year-end—quite possibly as early as September by some accounts—as the US Federal Reserve looks to temper the expansion of the world’s largest economy with an interest-rate increase.

De Quiros said the fund has started reviewing its investment policy to try to find how much of its portfolio may be deployed for the overseas markets.

Susie G. Bugante, vice president for public affairs and special events, said there is a limit as to how much of the fund’s portfolio may be deployed outside of the country.

Given an estimated investment portfolio totaling more or less P430 billion, give or take a few billion, the SSS could deploy roughly P45 billion, or $1 billion, for such a program.

De Quiros said the fund has never ventured beyond the country’s territorial limits when deploying the resources at its disposal, which are typically invested only in domestically issued equity securities and peso-denominated government bonds and notes.

He said the fund typically dispenses membership benefits, totaling more or less P49 billion every year, but generates contributions no larger than P45 billion.

“You do the math. At some point one has to raise member contribution or risk the depletion of our reserves,” de Quiros said of that part of the fund used to finance membership claims, such as pension and funeral expenses, among others.

Pension benefits were raised 5 percent just last year, he quickly added.

The SSS generated 7 percent more revenues in the first four months this year to P54.35 billion from year ago of only P50.77 billion.

This resulted from member contributions totaling P42.69 billion, plus investment and other income of another P11.66 billion.

The fund spent an aggregate P39.14 billion in those four months, or 9.8 percent more than last year, and resulted from benefit payments totaling P36.57 billion plus operating expenses of P2.58 billion, which was 6.6 percent more than the year- ago expenses.

As a result, the SSS posted net revenues of P15.21 billion for the period this year, basically unchanged from year-ago net revenues of P15.14 billion.

De Quiros said the SSS did quite well in managing the resources of the pension fund over six years from 2009 up to 2014, when its so-called return-on-investment (ROI), essentially a measure of its profitability, averaged 9.8 percent over such benchmarks as the one-year Treasury bill rate and the 10-year Treasury bond rate.

The fund posted ROI averaging 9.7 percent in 2009, 10.8 percent in 2010, 10.5 percent in 2011, the same rate in 2012, then 8.8 percent in 2013 and 8.3 percent just last year.

The SSS executive also said management had been prudent in keeping fund operating expenses as percent of gross revenues low, averaging 68 percent in 2010 when his team took over and still lower to only 52 percent just last year. De Quiros said SSS management in 2005 operated close to the expense cap allowed by its charter at 91 percent of gross revenues that year.

Image credits: Nonie Reyes