Senator to SSS, GSIS: Go slow
on P63B for overseas investments

Sen. Loren Legarda, Senate economic affairs committee chair, has urged the Government Service Insurance System (GSIS) and the Social Security System (SSS) "to go slow" on their plans to stash overseas up to P63 billion of their investment funds.

"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 said.

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 forecast 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 said she is not opposed to 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."

"We 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," Legarda said.

"The global financial markets of today are not same as five to 10 years ago. There are so many 'hidden' risks nowadays, partly on account of the emergence of so many new inter-related 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 US subprime mess.