The SSO, which manages about 1.1 trillion baht worth of pension contributions for local workers, aims to increase holdings of international stocks to 12% of its assets in five years, Win Phromphaet, the head of investment, said in an interview with Bloomberg News.
The SSO will double the number of staff in its investment division to about 100 by 2015 and may open offices in global financial centres, he said.
The pension fund is seeking higher returns abroad after valuations of local shares rose to a one-year high, government bond yields fell below their 10-year average and projections showed the number of pensioners receiving benefits will jump about 80-fold in the next 10 years.
The SSO also plans to double its holdings of real estate, commodities and alternative investments to lift annual returns to about 5.5% from the current average of 4.5%.
“Our current assets generate such low returns that it exposes us to major survival risk,” said Mr Win, 37. “The benefits for retiring pensioners will surge to such a level that we have an urgent need to boost income from some other risky assets.”
Prices for Thai stocks and bonds have climbed this year even as the economy contracted in the first quarter and the army took power in the 12th successful military coup since 1932.
The SET Index on Friday closed at 1,483.24, its highest close in eight months and up 1.1% from a week earlier. For the year to date, it is up 14.2%.
The SSO, which was established in 1990 to provide healthcare benefits and expanded into pension welfare eight years later, currently invests 85% of its assets in local bonds.
The planned increase in overseas shareholdings will lift the fund's total equity exposure to about 23% of assets from 10%, said Mr Win. The allocation to real estate, commodities and alternative investments may rise to 10%, while total assets will probably climb to around 2 trillion baht by 2018, he said.
The SSO’s overseas push comes at a time when regional peers are also expanding abroad to increase returns. Japan’s Government Pension Investment Fund, undergoing its biggest-ever reshuffling, will probably raise its weighting in overseas shares to 17% from 12%, according to a survey of analysts by Bloomberg News last month.
South Korea’s National Pension Service said in February that it may hire foreigners for the first time as it increases its international holdings.
The number of Thai pensioners eligible for monthly benefits will jump to about 800,000 in 10 years from 9,900 as of last month, said Mr Win.
The SSO, which is bound by law to invest through local mutual funds, will seek changes from the military government so that it can invest directly in overseas stocks, bonds and other assets, he added.
The SSO joins the Government Pension Fund, which manages pensions for state workers, in seeking greater returns overseas. The GPF said last month that it was buying shares in India, Indonesia and the Philippines amid political turmoil at home.
Mr Win said most Thai stocks were expensive following their recent gains. The fund is currently holding about 20 billion baht in cash and waiting for a pullback before buying local shares. Outside of Thailand, the SSO is considering investing in developed markets, Win said.
"We are more upbeat on Japan and Europe than most of Asia’s emerging markets," he said.