The Social Security System (SSS) said Monday it is increasing its investments in real estate investment trusts (REITs) to boost the agency’s income and provide better returns for its members.
SSS president and chief executive Rolando Ledesma Macasaet said the state pension fund expressed optimism on generating more profit from its P6-billion investment in nearly all the REITs available in the Philippines.
Macasaet said of the P6-billion investment, more than 75 percent were purchased this year and yielded around 8 percent.
This promising figure is expected to significantly boost the SSS investment portfolio, instilling a sense of optimism among stakeholders, he said.
Macasaet’s bullish outlook on REITs prospect is underpinned by expected interest rate cut in the second half of the year and the increasingly favorable market conditions. The positive outlook sets the stage for potentially higher returns on SSS’ investments.
SSS investments sector acting head Ernesto Francisco Jr. said the SSS 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 would be among the top contributors to this year’s investment income because they continue offering attractive dividend yields that are higher than the prevailing benchmark rates.
He said the SSS would continue investing in REITs in the upcoming years because they could 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 said.
Macasaet also observed the trend among REIT companies to infuse more quality assets.
“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.
Francisco said the Singapore experience on REIT development only shows that REITs could become a very significant growth driver in the Philippines.
