Fund consultant pushes for change in asset allocation

The NMI Retirement Fund’s investment consultant is pushing for some changes in how the Fund currently invests its assets in the wake of a court order that requires the pension program to set aside a fixed amount for its beneficiaries.

Wilshire Associates wants a “more conservative” approach in the Fund’s asset allocation model and in how it will invest the Fund’s assets, according to Fund legal counsel Christopher Timmons in his report to the board Friday.

Maggie Ralbovsky, managing director and principal of Wilshire Associates, declined, however, to comment on its recommendation, saying the company will be making a presentation at the upcoming semi-annual meeting next month.

“I cannot respond to your question at this time since the board has not reviewed the details. I plan to visit Saipan at the mid/end of August to meet with the trustees,” Ralbovsky told Saipan Tribune in an email yesterday.

Only after the board has evaluated the situation will details of the recommendation be shared, she added.

Wilshire is expected to discuss its full recommendation on Aug. 22 and 23.

In October last year, the board was presented with three options on the strategies its money managers will use in handling the Fund’s investment portfolio: conservative-alternative, moderate-alternative, and aggressive-alternative.

The board chose the moderate-alternative approach, which involves a more aggressive strategy but with a slight risk. Board members said that, although a bit riskier, this approach seeks to obtain a higher return for the Fund’s investments.

During Friday’s board meeting, Timmons reported that Wilshire’s new recommendation is to use a more conservative approach, in order to comply with the Superior Court’s set-aside order. If the board adopts Wilshire’s new recommendation, the new asset allocation may be the conservative-alternative option.

As of June 30 this year, the Fund’s investment portfolio was valued at an estimated $311 million. Common stocks account for 65 percent; fixed income, 27 percent; hedge fund, 6 percent; and money market, 2 percent.

Just recently, the board selected new money managers that will handle the Fund’s investments. According to Timmons, their contracts are now being processed and reviewed.

From nine money managers, the Fund now has 14 companies handling its investments.

Saipan Tribune learned that fiscal year 2008 was considered the worst year on record for the market and, like other retirement and pension plans, the Fund lost a considerable amount. In 2001, the Fund also experienced a 20-percent drop in its investment assets and 10 percent during the Asian crisis in 1990s.

The Fund needs about $860 million in its investment fund to be fully funded by 2045. The current $311 million is only about 36 percent of the needed amount.