BECAUSE of various pressing factors that will negatively affect returns to the Solomon Islands National Provident Fund (SINPF) members, plans to diversify investments are in the pipeline.
Chairman of SINPF Baoro Laxton Koraua said although the fund currently have a high level of cash holding both in local and offshore banks, there’s still little return to members.
“The cash holdings both in local and offshore banks of are around $730 million, but it is returning very little to members, as deposit rates in these banks at present are below one percent per annum, due to high liquidity in the domestic financial market and expansionary policies in offshore markets,” Mr Koraua said.
He added that government bonds and securities are also yielding very low returns (around 2.0 percent per annum).
“The risk to members are that your funds are earning returns below inflation, undermining the value of your contributions but more importantly less than what we are by law required to credit your contributions annually at 2.5 percent, i.e. making money at less than 1% and paying you 2.5 percent. This is clearly not sustainable.”
He added that after revaluation of key investments in Telekom and SPO, the exposure to equity investments has substantially increased.
“That means our exposure to high risk investment has dramatically increased. This is a concern to the Board, and we are actively trying to find ways to mitigate these risks by increasing investments in other investment asset classes, including overseas.
“We have nearly 90% of our investments here in Solomon Islands and 10% abroad.
“While this is a great thing that we are helping to develop our country, our first responsibility is to protect our members’ investment.
“We need support from the Central Bank to approve more offshore investment to diversify and reduce this risk of domestic exposure.
“The board continues to proactively seek out investments in our core sectors i.e. telecommunications, fishing, tourism, infrastructure, and fuel distribution as a conscious strategy to diversify your risk.
“We are also keen to look at ways of working together with key statutory assets of the nation, where warranted.”
By EDNAL PALMER
