Bahrain pension fund will invest in US and Europe

Manama: Bahrain's Social Insurance Organisation (SIO), a state-owned pension fund that sits on nearly $4.5 billion (Dh16.52 billion) in cash is expected to invest about half of that money in shares and bonds across the US and Europe, said Shaikh Mohammad Eisa Al Khalifa, CEO of SIO at a recent media event organised by BNP Paribas on the sidelines of the Bahrain Grand Prix.

SIO manages $9.3 billion in investments and owns 9.5 square kilometres of prime land in Bahrain. While more than 80 per cent of its total investment allocations are in the local economy, about 50 per cent of its assets are held in cash due to the volatile global markets.

"We intend to reduce our total cash holdings to about 30 per cent of our total assets. Currently, the market pricing across the world looks very attractive and we intend to start investing in solid equities and bonds across the US and Europe," said Shaikh Mohammad.

The organisation intends to start allocations in equity markets by the end of the first half of this year. Despite the market turmoil, value erosion of about 40 per cent in its equity portfolios, Shaikh Mohammad said overall SIO returns have been protected against the downturn due to a diversified investment strategy and has achieved its annual average return of 6.5 per cent.

SIO has an active hedge fund strategy based on managing the managers. "Although it has not been a great year for hedge funds in general, our hedge funds portfolios have performed better in relative terms. Although globally there have been massive redemptions we continue to remain invested," he said.

Going forward, the fund intends to include mature emerging markets such as India and China in its investment radar.

SIO, Bahrain's sole pension fund, plans to spin off its fund management business into a separate asset-management company to be regulated by Bahrain's central bank. The new company expects to get a licence in two weeks, Al Khalifa said.