By Panu Wongcha-um
BANGKOK, 18 (Reuters) – Thailand’s $88 billion pension fund urgently needs to reform governance and diversify its investments, two of the fund’s executives told Reuters, after a recent selloff triggered by the Middle East conflict raised a warning about massive loss risks.
The country’s largest state fund, managed by the Social Security Office, supports healthcare, unemployment benefits and pensions of some 25 million Thais.
The value-at-risk metric — a measure of maximum tolerable portfolio loss risk — breached its 8% threshold on March 9, largely due to its exposure to Thai equities, said Sustarum Thammaboosadee, a board member of the Social Security Office.
Thailand’s benchmark share index has fallen sharply since the start of the U.S.-Israeli war against Iran, driven by panic selling. An 8% drop on March 4 set off a market circuit breaker for the first time since the COVID-19 pandemic.
“The impact exceeded our value-at-risk limit for the first time in two years,” Sustarum said, referring to an internal model that assesses volatility based on a number of factors and monitors risk limits.
As of December, Thai equities made up 7% of the fund’s portfolio, which remains heavily invested in government and state enterprise bonds as well as low-risk assets. Data shows 69% of the fund is in low-risk investments.
STRUCTURAL CHALLENGES AND CALLS FOR REFORM
Phanthira “Petch” Vergara, another member of the fund’s investment board, highlighted longstanding structural issues, including limited diversification and bureaucratic decision-making.
“We are basically where Malaysian pension funds were 10 years ago,” Phanthira said, adding that countries such as Japan, South Korea and Malaysia have long implemented reforms that Thailand has yet to address.
Returns on some portions of the fund’s portfolio have been so low they can barely be called investments, and the fund must seek higher returns to handle expected global shocks as well as the demands of an aging population, Phanthira said.
“We have the potential to be the next Malaysian or South Korean pension fund in Asia if we are able to fix our problems,” she said, citing other countries’ professionally managed, independent funds.
Phanthira, formerly an executive director at Goldman Sachs, had previously said the fund aimed to reduce allocations of low-risk assets to 60% from more than 70%, while increasing higher-risk investments to 40%. That would include allocating $11.6 billion to global private assets such as private equity, private credit and hedge funds.
The fund aims for a balanced 50-50 portfolio by 2027 to improve returns as the country faces rising demand from an aging population. However, progress has been slow, with low-risk assets still accounting for 69% of the portfolio.
CALLS FOR DIVERSIFICATION
The fund’s portfolio remains heavily concentrated in Thailand, leaving it exposed to domestic market fluctuations, Phanthira said.
Around 40% of the fund’s overall investment is in foreign markets and 60% are in domestic assets, including bank savings.
“When Thai markets perform well, they still tend to underperform global assets,” she said. “Without broader global diversification, we miss opportunities compared with other pension funds.”
Phanthira pointed to South Korea’s national pension fund, which recorded a return of 18.82% in 2025 due to broader exposure to international assets.
The fund’s structure as a government agency under the Labour Ministry also restricts its ability to respond quickly to global shocks such as the ongoing Middle East conflict, Sustarum said.
“In other pension funds, there would be a process to inform the public about how the fund is managing the volatility,” he said. “But for us, it is a closed system that lacks flexibility and transparency.”
The Social Security Office has defended its management of the fund, saying it remains financially sound. Spokesperson Niyada Seneemanomai said that the office has a reasonable degree of flexibility and can hire professionals on competitive salaries.
Meanwhile, reform advocates argue that independent, professional governance is critical for long-term sustainability and some have called for more transparency and oversight.
They proposed structural changes such as giving insured workers greater representation on the fund’s board and changing management to an independent body of professional fund managers for better returns.
“Under the current structure, it not only makes it harder to manage risk during global crises, but also prevents the fund from fully capitalising on opportunistic investments,” Phanthira said.
(Reporting by Panu Wongcha-um; Editing by Jacqueline Wong)
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