Why this matters
We have a strategic approach to investment and are constantly considering what changes we should be making to our investment mix to ensure strong long-term returns for Members. As Member contributions are received, the Fund must decide how and where to invest those funds to ensure long-term real returns for Members.
The Investment Objective of the Fund is to achieve a return after expenses and taxation, but before reserves allocation (if any), of the Consumer Price Index (CPI) plus 2% over the medium-term. The Fund aims to achieve this objective with a reasonable degree of certainty, by requiring the expected probability of a negative return to be not more than one year in five.
To that effect, the Fund has developed an Investment Strategy that guides our efforts and outlines our “compass”, through the SAA. The SAA is regularly reviewed, including the target asset allocations, prospective returns, associated risks, and the liquidity requirements of the Fund’s investment portfolio against its liability profile.
How we create value
In pursuing our objectives, NSL continues to invest in a range of assets locally, which provide broader benefits to PNG by supporting local companies, building much needed infrastructure, and creating jobs.
A great proportion of Member funds are invested in well-known brands in PNG such as BSP Financial Group Limited, Westpac Bank, Credit Corporation, Kumul Hotels (which utilises the 'Holiday Inn' Brand in Papua New Guinea), Toyota Tsusho, City Pharmacy, SP Brewery, and Paradise Company which make EmNau biscuits, Queen Emma chocolate and Gala ice cream. Not only are our Members getting good returns from our investment in these businesses, they are also proud part-owners of major PNG companies and organisations that continue to provide local jobs and are main-stays and drivers of the local economy.
Nambawan Super puts Members' interests first and advocates for their funds to be managed in an independent and professional environment. We do not invest in businesses that run against the best interests of PNG and ultimately our Members. We pride ourselves on our integrity and trustworthiness, and our governance and accountability processes that preserve and grow Members' funds for their retirement benefit.
We invest our Members' savings in a diversified range of investments. This approach may be best described and understood as “not putting all your eggs in one basket”. The aim is to mitigate the likely negative impact on a Member’s retirement funds from an investment that might perform poorly while other assets in the portfolio might be doing well during the same period. Members' retirement savings are invested in Government bonds, commercial and residential property, and local and international companies. Over the past decade, we have also patiently built up our offshore investments, which enables us to access a much wider range of investments not otherwise available in PNG.
We employ a local team of investment professionals and are able to draw upon international expertise when required. Our people are also continually improving their skills and expertise, often through internationally recognised institutions. We aspire to operate at the standards expected internationally, while always being mindful that engagement with local businesses requires an understanding of the local economy.
The legislation governing the superannuation industry in PNG is the Superannuation (General Provision) Act 2000 (the Act). The Bank of Papua New Guinea (BPNG), is our regulator according to the Act, and supervises the activities of Nambawan Super to ensure the rights and interests of our Members remain protected. BPNG does this by issuing Prudential Standards that reinforce the provisions of the Act and supervises both NSL and our Licensed Investment Manager (LIM), Kina Funds Management Limited (KFM), through regular reviews and comprehensive reporting.
Nambawan Super in consultation with Kina Funds Management (KFM), works within the framework of these regulatory settings to ensure targeted returns can be achieved in the medium to long-term without taking excessive investment risks, as envisioned in our Investment Strategy and SAA.
The Fund’s primary purpose is to preserve and maximise the superannuation benefits of its Members through prudent investment management. The principal objective of the Fund is to provide a return after fees and taxes above CPI plus 2% over the medium-term.
The Fund’s investment strategy guides the investment decisions of NSL and is subject to regular review to ensure it remains appropriate and relevant to our investment objective, risk tolerance and liability profile of the Fund, which are constantly evolving.
This Investment Strategy documents the Fund’s SAA, which sets out the target allocations to certain classes of investment assets. In determining the SAA, the Trustee Board considers:
- The risks involved in making and holding an investment under each of the different categories;
- Possible investment baskets or asset classes;
- The likely returns from each asset class, including the distribution of returns on each asset class, knowing that investment returns (especially for riskier investments such as equities and property) are not the same each year, and may indeed be negative in certain periods;
- The distribution of returns on the portfolio as a whole, taking into account the diversification of the Fund’s assets, to ensure adequate risk mitigation;
- How liquid each investment is and the liquidity of the portfolio as a whole; and
- The Fund’s cash flow requirements in line with its liability profile and liquidity characteristics of its assets.
Investing for the long-term
Superannuation is a long-term investment and rewards consistent savings accrued over the long-term. Nambawan Super follows international best practices and has a disciplined investment approach that is designed to withstand some of the headwinds in a constantly evolving global and local investment environment and protect investment returns for our Members.
Members who patiently save a portion of their wages through superannuation, benefit in the long-term through the effects of compounded returns generated from their savings. In a typical Superannuation savings scheme, it is commonly observed that interest earned and paid to a Member’s account would exceed their annual cash contributions in the latter part of their working lives as their savings balances grow.
We constantly think about what might happen and how tough periods impact our Members. The emergence of the COVID-19 pandemic in late 2019 and its effects on many aspects of life very quickly changed the outlook for the world economy and for PNG. These unexpected events remind us that despite our best efforts, we cannot predict the future. The Trustee Board, therefore, considers contingency plans and takes a long-term view when investing Members’ savings.
Superannuation is long-term and the Fund’s Investment Strategy includes a long-term focus to increase the Fund’s investments in offshore assets, which will enable better diversification than if restricted to just PNG assets. This will also enable the Fund to invest in assets that are much more readily sold and converted into another asset, or cash, or even converted back to PNG Kina if larger-than-anticipated Member retirements require more cash to be paid out.
The Trustee Board has in place a sensible Investment Strategy, focused on maximizing returns whilst balancing risk, and at the same time ensuring enough cash will be on hand to pay Members as they retire and exit the Fund.