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Thai pension fund to up PE allocation – Exclusive

Thailand’s $20bn Government Pension Fund is looking to increase investments in mid-market private equity by 2020.

The Government Pension Fund of Thailand is looking to increase its allocation to private equity in the next three years, in a move to diversify away from its Thai bond-heavy portfolio.

Arsa Indaravijaya, senior director, head of investment strategy department at GPF, told Private Equity International it expects to increase its current 2.6 percent allocation to 4 percent by 2020.

While its long-term target for the asset class is 3 percent, Indaravijaya noted the pension fund is awaiting approval from Thailand's finance ministry to increase its offshore investment limit from 30 percent to 40 percent, which would affect its private equity exposure. He said once the limit is extended, GPF expects its allocation to private equity to increase to 4 percent.

GPF, a defined contribution fund set up in 1997 for Thai civil servants, manages $20 billion of assets equally split between its reserve fund and member fund, of which it makes its investments.

Thai bonds make up the lion's share of GPF's portfolio at approximately 55 percent, followed by equities at 20 percent, alternatives at 11 percent, and the remainder in absolute return funds and inflation-sensitive assets, according to its website.

Of its private equity exposure, 1.84 percent is in global private equity and 0.86 percent in Thai private equity. The pension fund primarily invests in US and European private equity funds through global funds of funds. Meanwhile in Asia, it has backed Mumbai-based private equity firm Kedaara Capital and Shanghai-based Vision Knight Capital via funds of funds, and has also made direct investments in South-East Asia-focused firms Navis Capital Partners and Lombard Investments.

Indaravijaya added GPF has diversified into most strategies – buyouts, growth, distressed/special situations – but still finds the most opportunity in mid-market buyouts. He said the pension also expects 15 percent to 20 percent IRR for its private equity portfolio, but did not disclose its current performance.

Asked whether there are no-go areas for investment, Indaravijaya said the pension is not looking at the Middle East and North Africa, and is concerned about pricing in China, India and even Latin America.

“The team has also looked at China private equity through funds of funds earlier. China is where everyone thought there was a lot of potential and opportunity but after doing extensive due diligence it turned out few of those managers have delivered impressive performance,” he said.

“We believe in Asia as the world's growth engine for the next decades. Private equity is a long-term investment and we always keep our position here and expect to put more money into the region,” Indaravijaya said. “However, due to different development phases both in overall economics and the depth of the private equity market in each country, we are still quite selective.”