Thailand GPF's multi-asset strategy outperforms in uncertain times

The national pension fund is employing a mix of tactical and strategic asset allocations to grow and protect its portfolio amid market uncertainties, according to its chief investment strategy officer.
Thailand GPF's multi-asset strategy outperforms in uncertain times

Among the multitude of factors creating uncertainty for investors across the macro-economic landscape, inflation continues to dominate the headlines, according to Man Juttijudata, chief investment strategy officer of Thailand’s Government Pension Fund (GPF).

The $34 billion national pension fund uses a combination of long-term strategic asset allocation (SAA) and short-to-medium term tactical asset allocation (TAA) to future proof itself against uncertainties, said Juttijudata at AsianInvestor’s 4th Thailand Investment Briefing.

Man Juttijudata
Government Pension Fund

“With our long-term passive SAA, our clear objective is to beat the CPI by 2%. This gives us a two out of three chance of winning and we are fully loaded in the growth assets equity over the long term,” he said.

“The greater challenge is allocating over the short to medium term,” said Juttijudata. Over the last year GPF chose to invest in commodities like oil and real assets like private equity, infrastructure and real estate as a tactical asset allocation in a bid to hedge the effects of inflation.

“Once the shock inflation began appearing in headlines and passing on to the real economy, the rent from real estate, the income from the infrastructure continued to perform,” said Juttijudata.

The fund acted on the belief that the balance between inflation and commodities in the short term, and real assets in the medium term would stabilize its portfolio.


Juttijudata said that his team continues to believe in “old school” or long-held assumptions about asset-class returns and volatility, particularly in terms of correlation.

“We have a very diversified portfolio, investing in 18 asset classes. Domestically we invest in equities and bonds, while globally we tend to focus on real assets like real-estate and infrastructure. We also have some absolute return funds and use hedge funds for stability” he said.

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Theoretically GPF’s portfolio faces the risk of a negative return for one year out of every seven, but has only reported two years of negative returns in its entire 26-year history, said Juttijudata. This performance is mainly due its evolving multi-asset portfolio approach and understanding of how particular assets should perform in particular conditions.

“Furthermore, last year we increased our foreign asset allocation from 40% to 60%. We reduced some concentration on fixed income and bonds, and diversified further into global investment grade credit,” he said. “In our absolute return fund, the performance of the fund is determined by the skill of the active manager, so it’s quite uncorrelated to the overall markets.”


Despite identifying the fund as an old-school investor, Juttijudata said there is no denying that the landscape has drastically changed and GPF must adapt to capture value from the volatile markets.

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“We have to change our attitude and lean more into active management. However, we cannot start operating completely like a hedge fund—no matter how confident we are we won’t bet the money of over 1 million members,” he said.

The national pension fund has set a risk budget of around 10-15% for its active risk investments relative to its total portfolio. Given this limit, GPF set up an overlay portfolio with a derivative to manage the underweight and overweight major asset classes.

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“For instance last year, we shorted the bond futures to reduce the duration from eight years back to four years. We also leveraged the risk budget to short the S&P 500 and the NASDAQ, which yielded strong returns as the interest rates rose and equity and bonds both fell down together sharply,” said Juttijudata.

Through active management of the risk budget, Juttijudata believes his team can continue to partially protect GPF’s members in times of high volatility as well as create additional positive returns.

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