The Government Pension Fund (GPF) is adopting a combination of risk factor analysis and strategic asset allocation to manage its funds amid heightened economic volatility and rapid global changes, according to its new chief.
Soraphol Tulayasathien, secretary-general of the GPF, said on Thursday that the traditional approach of using asset allocation to diversify risk is becoming less effective.
“In the past, diversification meant investing in assets such as stocks and bonds, with bond prices typically rising when stocks fell. But in some situations today, stocks and bonds can decline simultaneously. As a result, pension funds overseas have begun exploring a new investment management concept known as the total portfolio approach,” said the former executive at the Stock Exchange of Thailand (SET).
“Rather than looking at investments by asset class, the approach focuses on risk factors. For example, given current concerns over the impact of inflation and war, funds need to consider how best to diversify their investments against these risks.”
For the SET, Mr Soraphol said the GPF believes performance remains strong, supported by robust fundamentals. Although GDP grew by only 1.9% in the second quarter of this year, private investment expanded by as much as 14%, indicating that investment in new growth sectors is beginning to take shape. This suggests the Thai bourse still has room to grow, although investors should diversify risks and take a long-term view of their investments, he noted.
Although many investments have generated good returns this year, challenges remain including the war and US tariffs, which affect GDP and inflation, as well as the Federal Reserve’s interest rate policy and volatility, said Mr Soraphol.
The GPF manages total funds of 1.6 trillion baht and has nearly 1.3 million members. The fund’s goal is to offer members sufficient savings to support themselves in retirement.
The average level of post-retirement income considered sufficient for living expenses is 37,000 baht per month, though 73% of GPF members remain below that level.
Saving more and starting early are key to ensuring that members have sufficient funds for retirement, he said. However, the average age at which civil servants begin government service has risen to 29, from 24.
GPF regulations allow members to increase their savings by as much as 27% on top of the mandatory 3% contribution, bringing the total contribution to 30% of salary.
However, 65% of members have not increased their contribution rate. Of the 35% who raised their savings contributions, nearly half increased their rate by only 1-3 percentage points.
Only 35,000 members increased their contributions by the maximum additional 27%, said Mr Soraphol.
According to the GPF’s investment performance data as of Aug 16, the return on the General Investment Plan was 8.08%, while the Life Path Plan for members under 50 returned 17.2%.
Investments in Thai equities returned 34.7%, overseas investments 24.2%, REITs 15.8%, the Vayupak Fund 12.3%, shariah investments 20.4%, and gold investments 5.58%.