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Financial News

May 2012 Financial News

US$4B in HSF

May 23, 2012

THE Heritage and Stabilisation Fund (HSF), worth US$4B (TT$25.720B), made a net gain of US$10 million (TT$64.30M) for the 2010 — 2011 financial year, it was revealed at a Public Accounts Committee Meeting at Tower D of the International Waterfront Centre yesterday.

The Committee heard that eight investment managers and one global custodian were paid US$18.5 million (TT$118,955,000) to manage the Fund. Alister Noel, Senior Manager of Operations at the Central Bank explained that managers are paid a percentage of the average monthly or quarterly market value of the portfolio they manage.

The Fund was started in 2007 and interest was accumulated by investing in simple US fixed deposits. However, the investments were later diversified as a strategy to minimise losses. The HSF was therefore divided into four portfolios — international equities, US equities, fixed income securities and short-term fixed income securities — as all four market usually do not face difficulty simultaneously.

The main focus of yesterday’s meeting, chaired by PNM MP for Diego Martin North/East Colm Imbert, was the under-performance of the Non-US core equity International Fund and the performance of its two managers.

The Annual Financial Statement of the HSF for the year ending September 2011 noted that the Fund had a rate of return of 0.79 percent while the benchmark rate of return was 1.14 percent.

However, in the previous year, there was a return of 6.07 percent with a benchmark of 5.75 percent and the benchmark was beaten for the previous three years.

Central Bank Governor Ewart Williams made the point that the benchmark changes with circumstances, given the happenings of the international market in the previous year. He also stressed that, while the gain was not as much as hoped, there was no loss.

He said the US$621 million international equity portfolio underperformed, compared to the benchmark, because the European investment climate took a turn for the worse due to the Sovereign Debt Crisis and difficulties reaching agreements on the Greece bailout. He noted, up to June 2011, the total rate of return of the HSF was in excess of five percent.

In the quarter immediately after September 2011, the market sentiment improved and there was a rate of return of 2.74 percent. In addition, in the first quarter of 2012, the rate of return improved even more, to 5.04 percent.

Therefore, he noted, the managers of the international equity portfolio should not be penalised for missing the benchmark since it was a result of the financial market.


Source:
By JANELLE DE SOUZA
Newsday
Wednesday May 23 2012

http://www.newsday.co.tt/business/0,160574.html