Maharlika to have 6 to 11% yield in 10 years

by Louise Maureen siMeon, PaoLo roMero Philstar.com

MANILA — The Senate committee on banks and financial institutions wrapped up on Monday, February 27 its hearings on the proposal to put up a Maharlika Investment Fund (MIF) that economic managers said can have an average yield of anywhere between six percent and 11 percent in 10 years.

Committee chairman Sen. Mark Villar said the panel will convene its technical working group to consolidate all inputs received in the three hearings even as senators indicated the Senate version of the MIF bill will have marked differences from the counterpart measure passed by the House of Representatives last December.

Upon questioning by senators, National Treasurer Rosalia de Leon gave initial estimates on the possible returns from the MIF, which is proposed to secure its seed fund from the Land Bank of the Philippines at P50 billion, P25 billion from the Development Bank of the Philippines (DBP), P17 billion from the Bangko Sentral ng Pilipinas and still undetermined contributions from the Philippine Amusement and Gaming Corp., royalties and special assessments on natural resources and privatization.

She said the MIF may be placed in private equity infrastructure or in the capital markets or both. If the fund –estimated to be initially at P150 billion to P200 billion – were invested in the capital market, it would have a 10-year average return of 6.51 percent.

“So that is of course higher than the important target inflation of two to four percent and even higher than our 10-year average GS (government securities) yield of 4.7 percent, indicating that it is a better return than the traditional conservative investment option,” De Leon said.

If placed in other sectors like power, real estate, infrastructure and logistics, the 10-year average return would be a 10.78 percent, she said.

“Of course, we’d like to diversify the portfolio… this would be a more realistic allocation strategy and on a 50-50 allocation between the major sub funds, 8.64 percent per year on average, which is also double the four percent upper bound of the long-term inflation target and more than two percent above the most recent yield,” she said.

Not unique the GFIs?” Ejercito said.

Senate Deputy Majority Leader Joseph Victor Ejercito said investments allowed under MIF are the same as those allowed for government financial institutions.

Such investments are in cash, foreign currencies, metals and other favorable commodities, fixed income instruments issued by a sovereign, quasi-sovereign and super-national and in joint venture or co-investments.

Undersecretary Zeno Ronald Abenoja, chief economic counselor of the Department of Finance, said the purpose of the MIF is to focus government investments on strategic destinations, but with commercial rate or even higher than market returns.

Villar sought the opinion of the National Development Co. on how the creation of the MIF would affect their operations. Some senators earlier said the NDC could be the one handling the MIF instead of the MIC.

“I just want to get a comment from the NDC and clarify what is your stand on the Maharlika Fund and the creation of Maharlika Investment Corporation,” Villar asked.

NDC general manager Antonilo Mauricio said the NDC does not have a position on the creation of the MIF since the agency has not been involved from the start in the conceptualization of the proposed sovereign wealth fund.

Mauricio, however, suggested to senators “to give emphasis on NDC as an investment arm.”

Asked by Sen. Nancy Binay whether the MIC would be a competitor to the NDC, Mauricio replied the corporation is focused on smaller deals and investment gaps that national government agencies might have overlooked.

Rogelio Quevedo, of the Office of the Government Corporate Counsel, explained that while the NDC would be focusing its investments on local

“What makes it (MIF) unique, because these are also being done by PAGE 10