thumbs up? or down?

GSIS to critics: Evaluate us at yearend

By Daxim Lucas
Philippine Daily Inquirer
First Posted 20:25:00 10/19/2008

THE HEAD OF THE GOVERNMENT Service Insurance System (GSIS) defended the state pension fund’s decision to invest in foreign markets amid a worldwide financial meltdown, saying that the agency would have performed a lot worse had it not diversified overseas.

At the same time, GSIS president and general manager Winston F. Garcia lashed out at his critics who he said were “nitpicking” and second-guessing his investment strategies.

“Name me even a single fund manager anywhere who is not losing money at this point,” he said in a telephone interview with the Inquirer on Friday. “GSIS’ investments stayed above water because of diversification.”

Garcia was responding to queries about the GSIS’ investment strategies regarding its $600-million global investment program, which has come under intense scrutiny in the wake of the financial crisis.

GSIS earlier said that the program earned for it P1.4 billion or about 5 percent since it started in April of this year, although the bulk of the gains were reported due to the sharp decline in the value of the peso against the dollar.

A closer examination of GSIS investments showed sharp declines in their individual values over the last six months.

During the interview, Garcia stressed that the fund should be evaluated based on how much income it could show at the end of the year instead of assessing its investments “on a day to day basis.”

“We make reports quarterly, and any losses should be reported at the end of the year,” he said, explaining that any dip in the value of the fund’s holdings would only be paper losses until the investments were actually sold.

Garcia also pointed out that “all investments in the whole world are down 40 percent.”

“This month is not even over yet,” he added, noting that it was too early to conclude that the GSIS was losing money.

While conceding that GSIS’ stock investments might be going through a rough patch, he pointed out that the pension fund also has sizeable investments in both foreign and local bonds -- most of which were performing well due to the markets’ prevailing preference for less risky securities.

“The whole reason for diversification is to manage risk and to balance it out,” he said. “You cannot get the best [from all your investments] all the time.”

“Our bonds are doing fine,” the GSIS chief added. “They’re making money.”

In a report it published two weeks ago, the GSIS said that it had acquired 123 stocks under the GIP.

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 UK-based lender Cattles Plc performing the worst, showing a 77-percent drop in its stock value. 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.

GSIS’ foreign assets are managed by ING Investment Management and Credit Agricole Asset Management.