To enhance investment returns, the Social Security System (SSS) has tapped two government-owned banks to serve as its local fund managers for the next three-year period. 

Rolando Ledesma Macasaet, SSS president and chief executive officer said, the pension fund has allocated P2 billion in investable funds to be managed by the Land Bank of the Philippines and the Development Bank of the Philippines (DBP).

The SSS chief said the trust fund divisions of Land Bank and DBP will each receive P1 billion, with the initial installment disbursed last Oct. 13, while the final tranche scheduled for Oct. 17.

“We see that SSS will greatly benefit from tapping external fund managers to manage a portion of our investible funds. We can take advantage of their expertise to help grow the SSS funds and diversify the investment portfolio,” Macasaet said in a statement on Thursday, Nov. 16.

Land Bank and DBP will work alongside other fund managers of SSS which were also hired to oversee Pure Fixed Income investments.

Fixed income investments are a type of investment where investors receive regular fixed interest or dividend payments until the investment reaches its maturity date. 

Government bonds and corporate bonds are examples of fixed-income products.

Earlier this year, SSS tapped the Bank of the Philippine Islands (BPI) Asset Management and Trust Corp. and Security Bank Corp.-Trust and Asset Management to manage a separate P2 billion fund dedicated to Pure Fixed Income investments.

The Social Security Act of 2018 or Republic Act No. 11199 allows the pension fund to appoint either local or foreign fund managers to handle its Investment Reserve Fund (IRF). 

The IRF is a specific portion of the SSS Reserve Fund that is allocated for investments, with the income generated from these investments being reinvested back into the reserve fund to facilitate its growth.

Since 2016, the hiring of local fund managers has been an integral part of SSS' investment strategy. 

Ernesto D. Francisco, Jr., SSS Fund Management Group senior vice president said this approach is a global best practice, particularly within pension funds. 

By engaging the expertise of fund managers in emerging markets where foreign investments may not have a competitive advantage, pension funds like SSS can effectively diversify their portfolios, Francisco said.

To date, SSS has already awarded management contracts for seven segregated investment mandates, encompassing Pure Fixed Income Fund, Balanced Fund, and Pure Equity Fund, worth a total of P8 billion. (Gabriell Christel Galang)