Super fund executives outline their investment strategies

How do Papua New Guinea’s two largest super funds, Nambawan Super and NASFUND, make investment decisions on behalf of their members? Two senior executives provide their investment guidelines, which have led both funds to perform well in difficult economic conditions.

Fund managers: Paul Sayer (left) and David Brown (middle) outline their investment approaches at the PNG Investment Conference in August. Source: BAI

Speaking at the Business Advantage PNG Investment Conference in Brisbane, Paul Sayer, Chief Executive of Nambawan Super said its assets under management are growing fast.

‘It is running at about 11 per cent growth annually,’ he said.

‘So in about seven years it doubles; in 12 years you are looking at a fund that is K25 billion.

‘With that, comes challenges about where we invest.’

David Brown, Chief Investment Officer of NASFUND, said it, too, has challenges related to its growing size.

‘The minimum investment they would consider is about K30 million.’

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‘We are very large investors in the context of PNG in terms of complexity, the size of deals.

‘The sort of things that we see in the PNG context are every bit the same as in Australia or New Zealand.’

Deals

Both executives said that the minimum investment they would consider is about K30 million.

Sayer said his fund has an orientation towards growth assets of 56 per cent—lower than in Australia, where the average is about 65 per cent.

‘Currently we have about 15 per cent offshore in equities; we have nothing offshore in fixed interest.

‘We have 36 per cent in fixed interest, so we are certainly supporting … the government.

‘About 90 per cent we do ourselves.’

‘We have almost 10 per cent in cash, so we are looking for opportunities to invest.

‘We hold about 14 per cent in property, and about 9-14 per cent in private equities.’

Sayer added that it is ‘hard to go into equities, listed and private’.

Outsourcing

Whereas the typical Australian super funds have about 90 per cent of their assets outsourced to fund managers, who invest in liquid markets, David Brown said the obverse applies in PNG.

‘About 90 per cent we do ourselves,’ he said. ‘It is more satisfying.’

‘When they seek to buy PNG companies, they look to bolt it on to another company.’

Brown said Nasfund garners a high yield on its investments.

‘The yield from our real estate portfolio would have any Australian chief investment officer salivating.

‘But we have changed our strategy, we have focused on high occupancy and that requires a certain product—so we are trying to improve.’

Acquisitions

Sayer said the foreign exchange restrictions can impede the fund’s ability to buy local companies because often they are foreign-owned and the sellers want to repatriate the funds offshore.

Both fund managers say when they seek to buy PNG companies, they often look to bolt it on to another company so that the acquired company becomes part of another business.

The greatest issue, they acknowledge, is finding investments of sufficient scale in PNG.

‘We have to have fairly large deals,’ said Brown. ‘We are kind of outgrowing the local market, in a sense.

‘We would love to see a vehicle that would aggregate small investors. We are speaking to government about it.

‘I think there is a lot of capital in the economy, but it is in stagnant pools.

‘We would like to be able to mobilise that.’

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