NATIONAL Insurance Fund (NIF) investments are headed in a new direction, which will result in a huge reduction in its reliance on Government paper by the end of the financial year 2013/14.
According to the senior director of the fund, Audrey Deer Williams, the NIF currently has some 76 per cent of its investments tied up in Government of Jamaica instruments and Jamaica Money Market Brokers fixed-income securities, but plans to reduce the figure to 50 per cent by the end of March 2014.
"There will be a significant shift, and based on the projections that we are seeing, higher yielding assets as well," she told Parliament's Public Administration and Appropriations Committee (PAAC) last Wednesday.
"It is a delicate balance, but it is something that we are conscious of and something the board is working actively to achieve," she said, responding to questions from PAAC Government members Mikael Phillips and Fitz Jackson, about the direction of the investments, after losses in interest income in the Jamaica Debt Exchange (JDX) in 2010.
The JDX programme cost the NIF $1.2 billion (US$13.4 million) below the projected $4 billion (US$44.8 million) in interest from Government bonds for 2010/11, but did affect the fund's ability to meet its commitments. Deer Williams, however, pointed out that this was not unique to the NIF.
Jackson asked that, in the light of that, what would be the NIF's investment direction, considering that it still has three-quarters of its investments tied up in Government paper.
"To further diversify the assets and, in fact, we have planned, in the next financial year, to place significant investments in other assets that are not Government paper-related, and so we plan that by the end of the next financial year, we probably will be down to about 50 per cent (in Government paper)," she explained.
She also said that currently, the NIF has 12 per cent of investments in equities and 11 per cent in real estate, and suggested that there should be some changes in terms of real estate assets over the next financial year.
She said that the NIF was having discussions with other ministries, departments and agencies of Government, concerning real estate acquisitions and had actually made provision in its 2012/13 budget to invest in Government properties, as well, which could see the fund becoming the Government's dominant landlord.
"We would rather earn the rent, and further diversify as well; It is really a win-win situation," she commented.
The PAAC recently learnt from the Cabinet Office that the Government could be paying as much as close to $2 billion in rent, lease and upkeep for accommodation occupied by its staff.
Committee chairman, Opposition MP Edmund Bartlett has requested that the Cabinet Office/Pubic Sector Monitoring Unit provide the committee with specific timelines on the implementation of a programme to reduce the cost to Government.
Deer Williams said that the NIF has already ensured that all National Insurance Scheme (NIS) parish offices, except two, are currently owned by the NIF.
"So we actually are renting from ourselves in terms of the parish offices. We will expand that programme during the next financial year, to include other Government ministries, departments and agencies," she said.
Bartlett said, however, that the drastic reduction in NIF investment in Government paper could impact the broader macro-economic strategy.
"It could be huge hit for Government's credit arrangements," he suggested.
But Deer Williams noted that there was talk, for example, about a "debt for assets swap" involving agencies with high levels of Government paper investments, which could reduce the effect. She added, though, that she did not know how far those discussions had reached and did not wish to comment any further on them.