Superannuation funds can help in tough times

During tough times, superannuation funds from Pacific island nations including Palau can work together to invest in infrastructure and help Pacific governments find the finance they need to respond to COVID-19.
Damien Beddoes, CEO of the Cook Islands National Superannuation Fund and Secretariat of the Pacific Islands Investment Forum (PIIF) – a peak body of Pacific Islands superannuation and provident funds said on Tuesday that an invitation to Palau join the PIIF is always open.
PIIF currently has 18 member funds in 12 Pacific countries.
Palau has not joined the PIIF yet Beddoes said as its social security scheme is a little different from that of other nations, but this does not mean that Palau cannot take part.
“The invitation has always been open to all the members of the Pacific to join the Pacific Islands Investment Forum because we focus on three things: we collaborate on the what all the funds are doing, we do a lot of education work, we have a lot of investment education we do and we co-invest,” he said.
In the COVID-19 crisis, it is co-investment that Beddoes says has the most potential to be beneficial for both governments and superannuation funds.
Co-investment sees Pacific super funds pool resources to make an investment in the private business of the state-owned entity.
In the case of an investment in a government entity, he explained: “So we would create an (investment) vehicle where we would put all our group’s money together as one, so it would be one (Pacific) entity co-investing with the government.”
As an example, Mr. Beddoes said the PIIF might invest in a government-owned monopoly power company by buying a 50% stake.
“What that does is that it provides the government with an initial large sum payment into …their finances,” he said.
“They can then choose to do with that cash what they want. They can reinvest it into other areas of infrastructure that may be social, which may provide options to use it for budgetary support, however, governments choose to use that money is entirely up to them.
Across the Pacific governments are looking for ways to fund their COVID-related economic stimulus programs are worried about taking on loans. According to Mr. Beddoes co-investment is a way of releasing funds without the cost burden of a loan.
For the Pacific super funds, many of which are invested in global stock markets hit by COVID-related volatility, the infrastructure investment provides a new lower risk asset.
“We put money there, we continue to receive a regular income from it versus having our money in the public markets where a there is a lot of movement, a lot of volatility and our valuations can go up and down and affect our return to our members every day,” Mr. Beddoes said.
Mr Beddoes sees a benefit for the management of the state-owned enterprise too. The PIIF has strict investment rules and often brings with it new management expertise, transparency, and independent board members.