The Government Pension Fund (GPF) is seeking board approval to increase its ceiling overseas asset allocation to 40% from 30%. It expects the process to be complete early next year.
Overseas assets account for 28% of the pension fund's portfolio, close to the ceiling, so it needs to raise the limit to 40% to be in line with a recommendation from a study conducted by UBS Asset Management, said secretary-general Vitai Ratanakorn.
A higher ceiling diversifies risk and allows the GPF to seek investment with a higher return, he said.
After GPF board approval, the higher ceiling will be stipulated in a ministerial announcement.
The GPF is required to allocate at least 60% of its investment portfolio in debt instruments, which are categorised as low-risk.
Mr Vitai said alternative investments such as infrastructure funds, property funds, private equity, foreign equities (particularly in advanced economies like the US) and government bonds are the pension fund's targets after the higher ceiling is approved.
The pension fund has 180,000 members and assets under management of 950 billion baht.
Although the baht has advanced about 7% against the US dollar this year, overseas investment yields an attractive return for the GPF.
For example, equities in advanced economies offer a handsome return of 18% in baht terms, compared with the local stock market's return of 3% so far this year.
The baht's strength also presents an opportunity for overseas investment if there is proper foreign exchange management, Mr Vitai said.
The GPF's return stands at 4.99% this year, he said.
Although the global economy is cycling down, an extended bull market has persisted amid concerted monetary policy easing by central banks around the world, he said.
The GPF aims for a return in the range of 4-5% a year on average during 2020-23.