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Report

Improving the performance of sovereign funds in the Pacific

30 Jun 2017
Description

One of the key projects for the NZIPR is examining the roles of Sovereign Funds (SFs) in the Pacific Islands. This reflects the fact that SFs are often the largest single asset owner and investor in the Pacific Islands, and the income stream from these funds can also be a large part of fiscal revenues. They can be an important part of Pacific Island wealth, and may help promote economic development and buffer Pacific Island economies from shocks such as natural disasters. Particularly in the smaller Island nations, they are also seen as mechanisms to enable greater levels of self-determination, reducing the reliance on foreign aid and remittances.

PI Funds are amongst the longest established SFs in the World (e.g. Kiribati’s RERF was established in 1956), and Pacific Island SFs tend to have much more dispersed and innovative funding sources than Funds established by larger nations. While most PI Funds tend to be very small in terms of AUM compared to funds in more populous nations, they can be very large relative to gross national incomes.

This report summarises the research that has been undertaken on SFs in the Pacific and draws out key findings, lessons and opportunities for funds to move closer to “best practice”. Our coverage of the Pacific Islands included the very small Island 6 nations in Polynesia and Micronesia, as well as the larger and more populous Melanesian Islands such as Papua New Guinea and the Solomon Islands. We also included a broad set of Sovereign owned funds – including Sovereign Trust Funds, Pension Funds, Stabilisation Funds, Development Funds, and other special purpose Funds.

We believe there are insights and lessons from the Pacific Islands experience that will be of interest to other small economies considering the role of SFs (for example in the Caribbean), and the wider SF research community. Despite this, research attention on Pacific Island SFs has been limited, and published cross-country studies tend to be focussed upon Sovereign Trust Funds rather than the broader set of SFs in the Pacific.

Our research program consisted of three phases:

1. A ‘desk top’ overview of Sovereign Funds in the Pacific, their purposes, and findings from the (relatively sparse) literature on the effectiveness in meeting their purpose.

2. The development of tools, including an assessment framework and “reference portfolios” to be used in detailed assessments of several PI Funds.

3. Application of the tools to assess the Tuvalu Trust Fund, Niue International Trust Fund and Tokelau International Trust Fund.

The focus of this paper is on phase three, where we draw out from the assessment some of the key common findings and opportunities we see to lift fund performances.

Publication Details
Identifiers: 
ISBN
978-0-473-39891-0
Publication Place: 
Auckland
Language: 
Peer Reviewed: 
Yes

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