“The nationwide community quarantine measures drastically affected the stock market since March 2020. Despite this, SSS investments continued to perform well and provided decent returns last year.”
— SSS President & CEO Aurora C. Ignacio
The Social Security System (SSS) earned a full-year investment income of Php32.47 billion in 2020 while its return on investments (ROI) attained 5.89 percent, outperforming key market indicators such as the 10-year Treasury Bond and 364-day T-bill rates which averaged 3.43 percent and 2.42 percent, respectively.
SSS President and Chief Executive Officer Aurora Cruz Ignacio said that the SSS investment portfolio still provided decent earnings last year despite the pandemic that shook the Philippine stock market. However, the previous year’s investment income was considerably lower than the Php40.97 billion recorded in 2019.
“The nationwide community quarantine measures drastically affected the stock market since March 2020. Despite this, SSS investments continued to perform well and provided decent returns last year,” Ignacio added.
She pointed out that the pension fund’s ROI in 2020 remained ahead of national economic indicators, particularly the -9.50 percent growth in the gross domestic product (GDP) and 2.60 percent average inflation rate for the same year.
“SSS investment performance has consistently outperformed major investment benchmarks. Whatever are the prevailing market conditions, we continue to perform well in our investment activities. As guided by our charter, we adhere to the principles of safety, good yield, and liquidity,” Ignacio said.
From 2011 to 2020, the SSS annual ROI averaged 8.07 percent, outperforming the ten-year annual averages of 4.72 percent for the GDP growth, 4.82 percent for the 10-year T-bond, 2.92 percent for the inflation rate, and 2.63 percent for the 364-day T-bill.
SSS Executive Vice President for Investments Sector Rizaldy Capulong said that government securities topped as the largest contributor to investment income at 42 percent, registered a 5.89 percent ROI, and brought in Php13.71 billion last year, slightly went down from the Php13.84 billion generated in 2019. Member loans came in second, which account for 21 percent of the total investment income. Income from member loans also dropped from Php8.97 billion in 2019 to Php6.71 billion in 2020 and registered a 6.82 percent ROI last year.
Capulong said that the combined income from government securities and member loans already comprise more than half of the total SSS investment earnings last year with Php20.42 billion.
“Properties are also generating good returns for the funds of our members as it recorded the highest ROI last year among SSS investments at 9.17 percent. About 16 percent of the entire SSS investment income came from properties that contributed Php5.08 billion, which remains a major component in our investment strategies,” Capulong stated.
The Php589-billion SSS investment portfolio is broken down as follows: government securities (41.86 percent), member loans (19.09 percent), equities (16.73 percent), properties (10.06 percent), corporate notes and bonds (5.83 percent), bank deposits (2.80 percent), external funds (2.17 percent), and housing and development loans (1.46 percent).
SSS investments must pass through risk management
“We can only invest our reserve fund on the types of investment prescribed under Republic Act No. 11199 or the Social Security Act of 2018,” Ignacio explained.
The law specified the limitations on the investment reserve funds that can be allotted per type of investment of which 60 percent in private securities, 5 percent in housing, 30 percent in real estate-related investments, 25 percent in short and medium-term member loans, 30 percent in government financial institutions and corporations, 15 percent in any particular industry, 15 percent in foreign-currency-denominated investments, 5 percent in private-sponsored infrastructure projects without guarantee, 5 percent in private and government-sponsored infrastructure projects with guarantee, and 5 percent in private and government-sponsored infrastructure projects.
All investment decisions, however, are governed by the Risk Management and Investments Committee (RMIC) of the Social Security Commission (SSC), which serves as the highest policy-making body of SSS. RMIC ensures that SSS complies with the law’s provisions on reserve funds’ investment and leads the development and adoption of guidelines to ensure transparency in its investment performance. It also ensures SSS’ compliance with risk management policies and practices. (/)