Overexposed: GSIS-Aranas breaches investment cap by P6.7B to buy stocks of favored, unnamed business group – COA
The Commission on Audit revealed that the Government Service Insurance System (GSIS) led by GSIS president and general manager Jesus Clint O. Aranas has placed the P1 trillion in investible funds of government pensioners in jeopardy after it breached the single investment limit in an unnamed investment group in 2017.
In its annual audit report, COA said the GSIS invested P59.688 billion in a single group of sister companies or subsidiaries. This is P6.673 billion or .63 percentage points more than the five percent limit for investments in single business groups.
“(This exposed) the fund to higher financial risks than what is authorized,” said COA. “Failure to diversify could result to mismanaged and unbalanced investment and thus, to low returns.”
COA said this was contrary to its Investment Policy Guideline (IPG) which stated that “maximum amount of combined equity or loan any risk exposure with any single group of sister companies/subsidiaries shall not be more than 5% of the total investible funds.” This policy is meant to force GSIS’ money managers to diversity its investments “to minimize concentration and unsystematic risk in the portfolio.”
“Investing beyond the established risk exposures and diversification may result to failure in effectively mitigating the effect of investment threats, inability to meet investment objectives, and to monetary losses. Authority from the BOT (Board of Trustees) for such excesses would regularize the subject investments,” said COA.
GSIS confirmed that it had breached the limit with its 5.75 percent exposure to the unnamed business group. But it claimed that the board approved the single investment limit from five percent to seven percent.
But COA revealed that the GSIS breached the five percent cap as early as November 2017 and still continued to buy stocks of the investment group in December 2017 and January 2018. It was only in March and May 2018 that the GSIS’ board sanctioned the breach and raised the limit to accommodate the unnamed business group, COA said.
“Review of the BRs (board resolutions) disclosed that there is no provision rectifying the breach in limits during 2017… (this shows) showing lack of monitoring of their investment portfolio,” said COA.