Superannuation company NASFUND continues to deliver positive returns to its members, Chief Executive Ian Tarutia tells Business Advantage PNG. But weak economic conditions in Papua New Guinea, foreign exchange restrictions and rising unemployment mean the organisation has to be agile.

Nasfund’s Ian Tarutia

NASFUND is one of PNG’s two major superannuation funds, servicing over half a million members and managing over  K4 billion in funds. With 88 per cent of its funds invested onshore, it is one of the PNG’s largest domestic investors.

Tarutia says the fund’s portfolio is diverse and the organisation is meeting its budget projections.

‘We’ve got a strategic asset allocation which says: “These are the asset classes that we should be investing in and these are the expected returns.”

‘For example: fixed income, shares, listed/unlisted, loans, properties and so forth. There have been tactical moves in between those asset classes. What we have done is shift away from low yielding cash deposits, and into higher earning Treasury bills.

‘That’s from the investment point of view. From an operational point of view, importantly, we continue to meet our obligations to pay members their superannuation entitlements, as and when they become due.

‘Since the completion of the PNG LNG Project, large scale projects  have slowed down somewhat.’

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‘We  have also introduced new systems to achieve efficiencies, as well as institutionalising our systems and processes, so that in the future if I leave, or if key personnel leave, then the systems that we have in place will carry on and will function.’

Challenging

Tarutia describes the economic situation in PNG as ‘challenging times’.

‘There’s no new major investments happening apart from Government spending on infrastructure and building,’ he says.

‘Tarutia says the fund’s strategy is affected by the scarcity of foreign exchange.’

‘Since the completion of the PNG LNG Project, large scale projects  have slowed down somewhat, and that was one of the underpinning factors of that surge in growth that we saw you know four or five years ago.’

Foreign exchange

Tarutia says the fund’s strategy is affected by the scarcity of foreign exchange. He says 88 per cent of the members’ funds are in domestic investments, the remainder offshore.

‘Unemployment is also putting pressure on the fund when it comes to maintaining liquidity.’

‘We have a strategy to invest some of our funds offshore to ensure that there’s better diversification of our investment portfolio, and to ensure that we have the opportunity to liquidate the portfolio as required to pay members’ dues when they need to become available.’

Tarutia says unemployment is also putting pressure on the fund when it comes to maintaining liquidity. ‘The superannuation legislation allows for members to tap into their super savings early.

‘If they have not contributed after three months, or if they have not sought alternate employment, the Act enables them to withdraw a portion of their funds.

‘We’ve had to review our investments over the mid to long-term and invest in shorter, more liquid types of investment.’

‘Then they can draw it down progressively, on a monthly basis, until 12 months is up. If they still haven’t resumed their contributions, by way of re-employment, then they can withdraw the residual balance.

‘We are now faced with an increase in unemployment and withdrawal payments, so that is a challenge for us.  It has obviously had an impact on our ability to accumulate  new funds available for new investments.

‘We’ve had to review our investments over the mid to long-term and invest in shorter, more liquid types of investments—like Treasury Bills, for example.’

Property

Tarutia says Treasury bills, which are typically held for a year or less, are currently providing a 7 per cent return. Longer-term government bonds (inscribed stock) are paying 11-12 per cent.

‘It comes down to, as an organisation, ensuring that strategic plans, risk measures and contingency plans are in place.’

Government bonds are ‘paying well and truly above’ the yields on the property portfolio, he says. An increased supply of high end property in Port Moresby is affecting the returns on property. , he says.

‘There is a surplus of good quality commercial and residential buildings coming on the market.  Previously, it was a landlords’ market; it is now a renters’ market.  It has an impact on our income stream.

‘It comes down to, as an organisation, ensuring that strategic plans, risk measures and contingency plans are in place: fall backs when times are as challenging, or tough, as we are experiencing at the moment.’