Herrera urges Lacson to bare true state of GSIS foreign investments

By TUCP
July 18, 2010

MANILA  –  Former Sen. Ernesto Herrera has urged the new chairman of the Government Service Insurance System (GSIS), Daniel "Bitay" Lacson, to immediately ascertain and then fully disclose to the public the true condition of the pension fund's $565-million Global Investment Program (GIP).

"GSIS members have no idea whether the GIP has been making or losing money, and to what extent it has been generating gains or incurring losses," said Herrera, secretary-general of the Trade Union Congress of the Philippines (TUCP).

"Over the last two years, the global financial markets have been highly turbulent. We reckon the GIP has been shaken by the turmoil," said Herrera, former chairman of the Senate committee on labor, employment and human resources development.

President Aquino earlier said that in all the areas where he campaigned, retired government employees, mostly former public school teachers, kept asking him where their GSIS pensions went.

"So I want to know the condition of GSIS. I don't agree with the explanation that it has failed to service its members because of computer glitches," Aquino said Thursday, when he named Lacson as the pension fund's new chairman.

Herrera said he could not agree more with the President. "When retirees don't get their pension on time, they don't care about the excuses for the delay. They will simply suspect that their pensions have been stolen one way or the other. Or that GSIS does not have the money, and is simply stalling payments," he said.

"After all, if you have a duty to pay a monthly pension, and you have the money to pay it, you will find a way to make the payment, regardless of any defects in the system," Herrera added.

Lacson should also find out and then reveal to the public the management fees being paid by GSIS to Credit Agricole Asset Management Ltd. and ING Investment Management for overseeing the GIP, Herrera said.

Winston Garcia, erstwhile president and general manager of GSIS, claimed early on that the GIP had a guaranteed eight-percent annual return on investment. Later, he said the GIP was expected to generate a five-percent yearly return.

However, Herrera said a five-percent return "might be barely enough to pay for the investment management fees due Credit Agricole and ING, plus the custodian fees due Citibank, N.A., all of whom are presumably getting paid, whether the GIP is making or losing money."

GSIS launched the GIP in April 2008. Under pressure from TUCP and members of the Senate, GSIS eventually published a summary of the GIP in newspaper advertisements in October that year.

GSIS then declared P10.456 billion worth of investments in "global fixed income" instruments, P4.127 billion in "global equities," P3.08 billion in "global property securities" and P8.875 billion in "cash, short-term notes and other investments."

GSIS did not provide the exact stakes it had in every type of instrument, despite TUCP's plea to post the details on the pension fund's website, to include the exact amounts invested in every bond, note, common stock and currency swap, at cost.

The pension fund simply indicated that some 40 percent of the GIP was invested in fixed-income instruments, including sovereign bonds or treasury notes issued by the governments of the United States, Germany, Canada, France, Japan, Italy, Spain and the United Kingdom.

It also implied that some 15 percent of the GIP was invested in common stocks of publicly traded foreign equities, 11 percent in property securities and 34 percent in cash, short-term notes and other investments, including currency swaps.

The GIP included a large exposure in the common stocks of foreign banks, including American, European and Asian financial institutions, many of which have been badly beaten by the global financial crisis.

Herrera urged GSIS under Lacson's leadership to follow the example set by the world's largest public pension fund, the California Public Employees’ Retirement System (CalPERS).

He said CalPERS reports on its website the exact number of shares of stock that it holds, including the acquisition cost of every lot of stock, whether US or foreign stocks. He said CalPERS also posts on its website the aggregate daily market value of its investment portfolio, for all to see.