Investment Worry says Solomon Star (SS)
The recent negative press coverage on NPF investments latest being titled above in SS issue number 6826 on Monday 12th February 2018 obliged us to reassure our contributing members that their funds worth more than $2.7 billion under our management as at 30 June 2017 are safe, growing and their values continued to be protected against inflation. These funds are invested in various assets in a number of markets worth more than $3.1 billion as at 30 June 2017.
Over the past 12 years to 30 June 2017 our members who had been with the Fund had enjoyed an average annual rate of return of 10.2% per annum on their contributions. After adjusting for inflation, their real average annual rate of return over the same period is a positive 3.4% per annum
To illustrate a $100 in their accounts in 2006 is now worth just under $300 as at 30 June 2017, a growth of more than 191%. If it is to grow at 2.5% pa the $100 will worth $131 on 30 June 2017, a growth of only 31%.
If the Board is overly risk averse and aim only for a member crediting rate of 2.5% pa.(the legal minimum crediting rate), the real rate of return for members after adjusting for inflation will be a negative 3.9% per annum in the same period. And our investment portfolio will predominately be in cash deposits earning less than 2.5% pa.
Our Board’s investment objective is to grow and protect our members’ retirement savings by at least 2% above inflation per annum over their membership term. A member normally stays with the Fund for a period ranging from 20 to 30 years. In the past 12 year period to 30 June 2017 the Board has achieved its investment objectives.
This is an excellent investment return and performance comparable to the best retirement funds in the region, over the same period.
The genesis of some of the investments that drive the excellent performance in this current 12 year period were made a decade earlier by the wisdom of past Boards and management, nurtured and turned around over time.
Our current major performing equity investments in our domestic economy include South Pacific Oil Limited (SPO), Solomon Telekom Limited (STCL), Heritage Park Hotel Ltd (HPHL) Soltuna Ltd and PNG based Bank South Pacific (BSP) with a branch here.
Also these investment subsidiaries are big contributors to the Fund paying huge sums of money of around $18,271,789 to the Fund annually for an estimated combined 2,803 employees working for our equity companies.
Besides being assessed for their risk and returns most of the Fund’s investment assets also have strategic value to our economy and country. SPOL – fuel supply four our energy needs, STCL in telecommunications, Soltuna food security, HPHL, Tavanipupu resort and 24 executive hospitality and tourism, Sasape Shipyard – transport and infrastructure and Solomon Housing – home ownership.
We are working to turnaround our property investments in the Sasape shipyard and other properties at Tulagi, Central Islands Province and the Tavanipupu Island Resort. These property investments have strong potential to positively contribute to our investment return within the next few years.
Investment performance and return fluctuates and we are always reminded that that past performance is not a guarantee for future performance. Hence we may not repeat some of the excellent returns we have achieved in the past.
Having a strategic asset allocation (SAA) simply a technical word for diversification - amongst assets, sectors and markets in various proportions, protects our return when one asset or certain parts of our investments portfolio is not performing
Interest applied on our members contributions are compounded annually. This is good for our members but challenging for the Board, as we continue to seek out viable domestic investment opportunities in a small market such as ours to grow our members’ retirement wealth that meets our Board’s investment objective.
The recent negative press coverage by Solomon Star on Mr. Charles Dausabea’s press conference contains a lot of false, misleading and inaccurate information, wild allegations, and threats. It also contains a huge misrepresentation of the position of the Fund, Board and Management and some are even defamatory in nature. The lack of verification by the SS also puts in question the credibility of the daily paper.
Looking through our files and archives we noted that Mr. Charles Dausabea has a long history of public smearing of the reputation and integrity of the Board, its management and the Fund.
The Board is a corporate entity and its members change constantly with some of our best national minds and people with integrity passing through. Current and past individual members have performed their fiduciary roles honorably as required under the SINPF Act, Financial Institutions Act (FIA) and other relevant laws.
As we and those before us move on, we will continue to contribute positively with integrity to the communities we live in.
Mike Wate
General Manager/CEO
