Maharlika Fund and the state of the nation

AS ANTICIPATED, the Maharlika Investment Fund was a highlight in the state of the nation address of President Bongbong Marcos.

A sovereign wealth fund (SWF), sovereign investment fund, or social wealth fund, refers to a government-owned investment entity that allocates its resources in both real and financial assets, including stocks, bonds, real estate, precious metals, and alternative investments such as private equity funds or hedge funds.

These funds have a global investment strategy, investing in various locations worldwide.

The primary sources of funding for most SWFs come from revenues generated by commodity exports or from foreign-exchange reserves managed by the central bank.

Some sovereign wealth funds are managed by a central bank, which accumulates the funds while overseeing the nation’s banking system. This type of fund holds substantial economic and fiscal significance.

On the other hand, there are sovereign wealth funds that consist of state savings invested by different entities aiming for investment returns.

These funds might not play a significant role in fiscal management.

The Maharlika Investment Fund, the country’s version of the sovereign investment fund, has been established to enable the national government to invest in a diverse range of assets, including foreign currencies, fixed-income instruments, corporate bonds, joint ventures, mergers and acquisitions, real estate, and infrastructure projects.

The bill that officially created the Maharlika Investment Fund was successfully passed in Congress in December 2022 and later in the Senate in May 2023.

On July 18, 2023, President Ferdinand “Bongbong” Marcos Jr. signed it into law, a week before his second State of the Nation Address (SONA).

funds in other Asian countries such as Singapore and Hong Kong.

The Government of Singapore Investment Corporation is a Singaporean sovereign wealth fund that manages the country’s foreign reserves.

It was established by the Government of Singapore in 1981 as the Government of Singapore Investment Corporation.

According to the Sovereign Wealth Fund Institute, the GIC controls the eighth largest sovereign wealth fund in the world, with $390 billion in assets under management as of mid2018.

GIC invests internationally in developed market equities, emerging market equities, nominal bonds and cash, inflation-linked bonds, private equity and real estate.

However, unlike those funds, the Philippines will not finance the Maharlika fund from excess wealth or foreign reserves, nor will it be funded by profits from natural resource extraction, similar to Norway and Kuwait.

Instead, the fund’s startup capital will come from government financial sources. The fund will be taking its start-up capital from government financial institutions and the national government:

• Land Bank of the Philippines (Land Bank)

– P50 billion

• Development Bank of the Philippines (DBP)

– P25 billion

• National government – P50 billion

The MIC, a government corporation established by the bill, possesses the authority to determine the assets and projects suitable for investment.

According to Rep. Joey Salceda and Marcos’ economic managers, the Maharlika fund was created at the President’s behest.

They stated that Marcos sought a fund to invest in significant projects that often get removed from the national budget after going through Congress.