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NIF not subject to BOJ forex investment cap

Published:Friday | January 10, 2014 | 12:00 AM
Audrey Deer-Williams, senior director of investments, National Insurance Fund. - File

The National Insurance Fund (NIS), the government agency responsible for management of public pension funds, says it does not face the same strictures on foreign-currency investments as fund managers in the private pension market.

Private pension funds are limited to five per cent of foreign currency assets, but the Bank of Jamaica (BOJ) has announced plans to double the cap to 10 per cent by January 1, 2015.

The central bank has given investment schemes, pension funds and security dealers up to February to provide their investment projections and audited financial statements.

TJE BOJ regulates the foreign-exchange market, while the pension market is overseen by the Financial Services Commission (FSC). However, as a state agency NIF is answerable to neither.

NIF Senior Director for Investments Audrey Deer-Williams said the agency was in direct discussions with the Ministry of Finance (MOF) in relation to its investment plans.

In dialogue with MOF

"Our investments are approved directly by the Ministry of Finance. We do not need BOJ approval. We are already in dialogue with the MOF regarding any possible overseas investment," Deer-Williams said.

Following the national debt exchanges in 2010 and again in 2013 in which the Government of Jamaica reduced coupons and extended the life of its debt instruments, the NIF has been diversifying its investment portfolio away from government paper into other classes of investment.

That strategy includes property acquisitions overseas in Washington, DC, and elsewhere.

"Approximately 18 per cent of our portfolio is in US-dollar investments comprised of both bonds and real estate - US$2 million of the amount is in real estate," Deer-Williams told the Financial Gleaner. NIF's total holdings was valued at $65 billion as at November 2013.

To be eligible for the revised cap, the BOJ requires pension funds and securities dealers to provide a foreign-currency investment projection (FCIP) outlining their current position and expected medium-term foreign-currency investment and foreign asset acquisitions, by February 28.

And: "in order to maintain eligibility, they must provide an updated FCIP quarterly within 60 days of the end of each calendar quarter," said the BOJ.

"At each step, the new cap will not apply to regulated entities that fail to submit the quarterly reports on time," the central bank said on its website.

The FSC is expected to provide the Bank of Jamaica with the reports to help in the assessment of the potential impact of these plans on the market, the central bank said.