PNG: Superannuation Fund makes new record returns
Updated
Papua New Guinea's National superannuation fund, NASFUND, has defied the world stockmarket downturn, by returning a record 37-percent interest to its members for 2007. The outstanding performance was in large part due to strong economic growth in the PNG economy and to NASFUND'S investment in highly successful domestic firms. Last year membership grew by 12,000, as more than 250 new companies turned to NASFUND for staff pensions.
Presenter: Jemima Garrett
Speakers: Rod Mitchell, joint Chief Executive of Papua New Guinea's National Superannuation Fund NASFUND
MITCHELL: Effectively, as of last week we credited 37 per cent into each member's account so their account balances increased by 37 per cent. When you consider that we have over 100,000 active members and 150,000 inactive members it's quite a considerable portion of the population who has some connection with NASFUND.
GARRETT: 37 per cent return in one year is a very substantial result. How does it compare with the sort of returns that super funds in other places around the world are achieving?
MITCHELL: Extremely well. We looked at the figures for the last five years and over the five years we've averaged over 20 per cent per annum. So to put into perspective I guess an Australian fund, the top of the Australian funds I think averaged over five years around about 16 per cent. So we're doing considerably better than counterparts internationally. When you also consider our inflation rate's around about three or four per cent the real returns to members are quite extraordinary.
GARRETT: How has NASFUND avoided the investment losses that other companies have seen as a result of the world stockmarket volatility?
MITCHELL: Ok our balance date is December 31 and I think the market volatility really only started early January. We have avoided it nevertheless and it's probably because we've had a bias in favour of Papua New Guinean assets and whilst we do have international assets in equities, they are not considerable in terms of the fund size. And if they are it's in a very diversified pot.
GARRETT: As you mentioned NASFUND's good result is in large part due to its investment in PNG companies. Which PNG companies have performed well for you?
MITCHELL: Well in the finance area Bank South Pacific continues to outperform, it's been an extraordinary story since it was privatised in 2001, and since then it has been a great performer. The other good performer has been New Britain Palm Oil. You may be aware that New Britain Palm Oil was listed on the London Exchange about two months ago and that's performed extremely well. So it's stocks like that which have really helped the fund along.
GARRETT: You've warned NASFUND members not to expect such good returns in 2008, why?
MITCHELL: Well I think the world markets have changed considerably from last year. Irrespective of the continued strong growth in the PNG economy we just can't expect to see the same sort of growth year in year out. I mean if we take ourselves back two years NASFUND credited 29 per cent and I was very cautious then about seeing another high return the year after. And I think as we come off I guess boom conditions you just can't expect us to continually credit in the 20s and 30s.
GARRETT: So what sort of returns are you expecting for 2008?
MITCHELL: We're looking somewhere between 12 and 14 per cent. Now that's crystal ball stuff, it's very hard to predict what's going to happen over the year. But we've also put in strong reserves, we've got nearly 80 million in reserve so we should be able to easily get into the double digits. But it'll be low double digits.
GARRETT: You've had an amazing growth in member numbers as well. Do you expect that to continue in 2008?
MITCHELL: Oh definitely, our strategy has been for the last three or four years to increase our branch network right round the country which we have. We've now got 11 branches, another one's going to be opened in Buka within the next two months. We've created products to bring more people who were outside superannuation now into superannuation. We've also developed a non-superannuation product for savings and we're able to offer a diverse range of people now some part of the NASFUND story.
