GSIS is lucky
Either the GSIS is good, lucky or both. We are referring to the institution’s timely move to create an exchange traded fund (ETF) based on the Philippine Stock Exchange Index (PSEi).
Fortunately for the GSIS, the stock market has been dropping. For an institution with a long-term investment horizon, the more stock prices fall, the better for them since they could accumulate the shares at lower prices. And unlike individual investors with short-term time frame, GSIS is able to withstand wide gyrations in the market.
Similar to Hong Kong’s tracker Fund (TraHK), which tracks the movement of the Hang Send index, the objective of the GSIS ETF is to track the performance of the PSEi. Upon its listing, TraHK became the largest fund in Hong Kong and the first ETF to be listed in Asia.
Likewise, once launched, the P15 billion GSIS ETF will become the largest equity fund and the first ETF to be listed in the Philippines.
But the similarities do not end there. TraHK also had its origins in a global crisis such as what we are experiencing right now. Back then, everything looked so bleak and the foreigners were selling Hong Kong shares. In the same manner, foreigners have been selling Philippine shares for a number of months now.
Making the right moves
So far, the GSIS has been making the right moves. Since 2000, their investment portfolio have already increased three-folds from P150 billion to P400 billion. Aside from their plans to introduce an index ETF, they are also going global in their investments.
They have recently signed an investment agreement with ING Investment Management and Credit Agricole Management for a $1-billion global investment program this year. They plan to invest as much as P2.5 billion or 25 percent of their assets in a diversified portfolio. This same strategy is exactly what sovereign wealth funds are doing. And GSIS’ timing has never been more perfect. Global financial assets have been falling due to a feared recession in the US caused by a lingering sub prime mortgage crisis.
Also, GSIS was able to sell their holdings in San Miguel Corp., Ayala Corp., and Equitable Bank at an opportune time. Recently, they have announced that they have raised their stake in Meralco to 20 percent by acquiring shares held by the National Government and through purchases in the market. The GSIS, together with other government institutions, now control almost 20 percent of Meralco. Meanwhile, the Lopez family (through First Philippine Holding and Meralco Pension Fund) controls 36 percent.
The scenario is like Equitable Bank all over again. With their strategic stake in Meralco, the GSIS may again command a hefty premium if they decide to unload their holdings - proving once again that they have the knack for being at the right place at the right time. - Valentino Sy, Philippine Star, Business Section, Philequity Corner, February 4.
Source: GSIS Layunin, Vol. 4 Issue 3, March 2008.