After Wall Street tumble, Fund says ‘hang on’

After America’s stock markets hit their lowest level in five years last week, officials with the Northern Marianas Retirement Fund are saying their investors should “hang on” through the turmoil in spite of news from a leading investment firm Tuesday that the nation is likely facing a long-running recession.

In a presentation to the CNMI legislature, Merrill Lynch consultant Kenan Knieriem yesterday said America’s “spiraling” housing market, coupled with—among other factors—rising rates of credit card and commercial debt, are contributing to the nation’s economic downturn. Investors, he added, might be in for a “long and deep recession” that, according to some estimates, could span from at least 10 months to up to two years.

A key Retirement Fund official last week acknowledged that the stock investments the fund’s managers have made stand to take a hit from Wall Street’s recent decline, but the fund will likely see fewer losses than the market due to the its policy of selecting a diverse array of investments. Knieriem, in his presentation, appeared to back that stance, saying that the fund can ride out the recent turbulence on Wall Street.

“This portfolio has been through the crash of ’87, the S&L crisis in the early ’90s, the bear market in bonds in ’94 when the feds had crushed the bond market, the ’97 Asian bank failures, the Russian default in ’98 and long term capital, the tech bubble and the last recession… and this fund is going to make it through this,” he said. “We’re going to make it through this but we have to be disciplined to the investment policies we’ve set up.”

Retirement fund board chairman Juan Guerrero advised the fund’s investors to take a conservative approach to the stock market’s downturn.

“The only thing I can tell them is to just hang on and not to react negatively,” he said.

When Guerrero addressed lawmakers after the presentation, he gave an impassioned plea for the government to provide the fund with more money in order to cover the payments it makes to retirees and maintain its operations, noting that the fund’s assets have already dropped by 22 percent during the current fiscal year. The money that the Legislature has allocated to the fund, he added, is barely enough to cover its annual expenses.

“We need the government to pay their obligation,” he said. “We need you to look within your resources.”

After the session, Rep. Joseph Guerrero (R-Saipan) said lawmakers are now in early talks on ways to meet the retirement fund’s needs, such as a potential deal to give it additional funding.

“What we didn’t know was what the actual losses were, so now it’s more important that the administration and the Legislature really make the fund more of a priority than we are right now,” he said. “We are certainly looking at other ways of funding the Retirement Fund. I’m not at liberty to discuss them right now until we can get a consensus but, just so everyone knows, we are looking at other options.”