THE Solomon Islands National Provident Fund (SINPF) board chairman admits investing members’ money amidst external influences is a challenge.
Speaking during the declaration of interests to NPF members’ savings yesterday, Baoro Laxton Koraua there are factors that are beyond the capability of NPF and the board that contributes to the challenges.
“The real challenge for NPF and the board is how to continue investing your money responsibly, giving you a healthy rate of return that is above inflation over your membership term.
“At the same time continue to protect these investments from external influences that are usually not the making of NPF,” Mr Koraua said.
He said the challenge is further complicated by the narrow economic base of the country, and the lack of good investment opportunities to invest in.
“SINPF is set up by the SINPF Act and its reporting standards are clearly specified in the NPF Act.
“However, for reporting purposes, we adopt international accounting and auditing standards.
“We are also audited to these standards by the Auditor General and his appointed agent and to comply with these standards, we have to revalue substantially all our investments every year.
“This is an added cost to your fund as these valuations must be paid for. Further, where revaluations have substantially increased values in certain investments, all of a sudden, we become overly exposed to one or two of our investment categories, for example, SPOL and Telekom, when in fact our real outlay of cash on initial investment in these entities did not even come close to breaching the concentration risk guidelines under the Financial Institutions Act, on risk diversification.”
The chairman meanwhile added that the board has missed out on “very good investment opportunities offered to it in the past because of this artificial exposure”.
“Further, we have been requested to divest some of our most profitable assets because of that exposure.
Mr Koraua therefore asked the Ministry of Finance and the Central Bank, to be mindful on how they calculate these risks when it comes to investments and divestments of the fund.
“Otherwise, as we can see today, SINPF is far too cashed up and will one day be in a position where it will not be able to return adequate returns to its members, especially if the bank interests continue to be where they are because of too much liquidity.
“Please help us make our job easier.”
He said currently investments are not diversified.
“Our investments are not well diversified as we would like them to be because of the challenges indicated above.
“However, because of these higher risk investments, the fund enjoys very healthy returns from these key investments.
“We are doing everything we can to mitigate those risks.”
By EDNAL PALMER