The Social Security System (SSS) expects to boost its income by increasing its investments in real estate investment trusts (REITs) this year, with the move expected to yield better returns for the pension fund.
In a statement yesterday, Rolando Macasaet, SSS president and chief executive officer, said SSS is optimistic to generate more profit from its P6 billion investment in nearly all the REITs currently available in the Philippines.
Macasaet expressed optimism, stating that of the P6 billion investment, more than 75 percent were purchased this year and yielded around 8 percent.
The SSS chief’s bullish outlook on REITs prospect is underpinned by the expected rate cut in the second half of the year and the increasingly favorable market conditions.
This positive outlook sets the stage for potentially higher returns on SSS’ investments.
Ernesto Francisco Jr., SSS investments sector concurrent acting head, said SSS currently invests 5 percent of its equity funds in REITs and looks to further increase on opportunities.
“REIT is a fantastic investment structure for pension funds like SSS because 90 percent of the lease income is mandatorily distributed. The REIT sector also greatly contributes to economic development since REIT players must reinvest within one year,” Francisco said.
Francisco predicted that REITs will be among the top contributors to this year’s investment income because they continue offering attractive dividend yields higher than the prevailing benchmark rates.
He said SSS will continue investing in REITs in the upcoming years because they can earn decently from steady rental income and growth.
“The more robust and diversified the cash flow of the REITs asset, the more we will invest in them,” he added.
“Looking ahead, we envision a promising future for the Philippine REIT sector, which could potentially become a major contributor to the capital market. Consider Singapore, where 20 percent, or six out of 30, of its Straits Times Index component is composed of REITs.
The absence of REITs in the Philippine Stock Exchange Composite Index presents a significant growth opportunity. Singapore’s vibrant individual investor base, a key growth driver of their REITs, serves as an inspiring model for us,” Francisco said.
