From $30M, Fund losses down to $9M

The NMI Retirement Fund has recovered most of the losses from the stock market crash last week, but it is still eyeing the situation closely.

Fund Administrator Mark Aguon said the market crisis, when it first hit last week, wiped out about $30 million of the Fund’s investments. But the Fund eventually got its money back and, as of Tuesday, has cut its losses down to $9 million.

“The market has been stabilizing, so we’re probably down by even less as of today,” said Aguon. “If this continues—as we hope it will—we should be able to recover all of our losses by the end of the month. It doesn’t look like we’re going to take such a big hit after all.”

Yet, he also said the Fund will continue to watch the volatile market closely.

Juan T. Guerrero, chairman of the Fund board of trustees, echoed Aguon’s optimism, citing recent efforts by the U.S. federal government to intervene in the crisis.

“The federal government is trying to solve the crisis,” Guerrero said. “I don’t think the federal government will allow the market to just deteriorate. Our only worry is if they [U.S. politicians] make this a political thing. If that happens, we can’t do anything. We’re mandated by law to invest.”

Richard Villagomez, investment director at the Fund, reported yesterday that the Fund’s investment portfolio was worth $418.75 million in July 2008. This represents about 42 percent of the Fund’s accrued liability, which amounts to $987.15 million.

The Fund’s assets have been on a downslide since 2006. In that year, the central government stopped contributing to the pension program, forcing the Fund to liquidate assets to make pension payments. In fiscal year 2008, the Retirement Fund withdrew $35 million, which is approximately half of the amount needed to pay retirees.

According to an actuarial study of the pension plan, if the Fund continues to liquidate assets at this rate—while failing to collect any amount from the government—the program could go bankrupt in eight years.

In related news, the Fund board of trustees has put off its plan to replace Merrill Lynch as its investment custodian. Guerrero said the board made the decision following some disagreements with its top choice firm. The firm’s proposed contract contained provisions and costs that were different from what the parties agreed upon during initial talks.

As investment custodian, Merrill Lynch supervises the Fund’s nine money managers—Atalanta, Stralem, Renaissance, Nicolas-Applegate, Fisher, Templeton, Richmond, Income Research, and JP Morgan.