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SSS confident in REIT outlook, considering raising investment

THE Social Security System (SSS) said it is confident about the outlook for its investments in real estate investment trusts (REITs), citing the instruments’ high yields.

SSS President and Chief Executive Officer Rolando L. Macasaet said in a statement on Monday that the SSS is bullish about the P6 billion it invested in nearly all the REITs currently available in the Philippines.

He added that more than 75% of the REIT portfolio was purchased this year with yields at around 8%.

The pension fund’s view on REITs is based on expectations the Bangko Sentral ng Pilipinas will cut rates in the second half of the year and what it perceives to be “increasingly favorable market conditions.”

“This positive outlook sets the stage for potentially higher returns on SSS investments,” SSS added.

SSS currently invests 5% of its equity funds in REITs and may further increase the allocation depending on opportunities, SSS Investments Sector Concurrent Acting Head Ernesto D. Francisco, Jr., said.

“REITs are a fantastic investment structure for pension funds like SSS because 90% of the lease income is mandatorily distributed. The REIT sector also greatly contributes to economic development since REIT players must reinvest within one year,” he added.

He expects REITs to be among the top contributors to the fund’s investment income this year because their yields exceed prevailing benchmark rates.

SSS will continue investing in REITs in the coming years as it looks to leverage the industry’s steady rental income and growth.

“The more robust and diversified the cash flow of the REIT assets, the more we will invest in them,” Mr. Francisco said, adding that REIT companies are injecting more quality assets into their portfolios.

“Consider Singapore, where 20%, or six out of 30, of the Straits Times Index component are 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,” he said.

SSS reported net income growth of 58% to a record P83.13 billion in 2023 due to mandatory contribution hikes and an increase in members. — Aaron Michael C. Sy