Fund posts double-digit growth in 2004

The NMI Retirement Fund posted a record high value $394.2 million in its investments as of December 31, 2004—a radical increase of about $40 million from its third quarter assets last year.

“This is our highest [asset value] in 23 years or since the [Fund’s] inception,” said Fund board chair Joseph Reyes yesterday, noting that the highest recorded figure took place several years ago at $390 million.

The Fund’s assets were at $350 million at the end of third quarter in 2004.

In an investment meeting held at the Hyatt Regency Saipan yesterday, Merrill Lynch consultants indicated that the strong market performance in the last quarter of the year was due to several factors, including investment strategy, asset allocation, as well as the overall market conditions in the U.S.

Merrill Lynch investment vice president Patrick McFadden said the market was better after the U.S. presidential elections. Fuel prices worldwide also began to dwindle during that time.

He said the recent decline of the dollar also made a positive impact on foreign companies. The Fund maintains one money manager, Templeton, for the international market.

Merrill Lynch investments associate Keri Tanaka cautioned the Fund’s board members and other officials, however, not to expect too much in 2005.

“Don’t expect a double-digit return in 2005,” she said, noting that such trend does not usually occur for two consecutive years.

She said double-digit growth was phenomenally observed only in the mid-40s or after World War II and during the technological bubble in the 50s.

“Is this [2005] the beginning of the bull market? It’s too early to tell. So this time next year, we may not see the same growth,” said Tanaka.

McFadden agreed, saying that U.S. inflation would influence a lot of decisions all throughout the world.

He said that the current political debate in Washington D.C. on the future of Social Security may also impact the CNMI. “But I don’t think that Social Security would affect the market,” he added.

Merrill Lynch data showed that, as of Dec. 31, 2004, the Fund’s large capital investments was at $195.7 million; small capital equities, $52.6 million; international equities, $53.5 million; fixed income, $55.2 million; Treasury Inflation-Protected Securities or TIPS, $20 million; and cash, $16.2 million.

Large capital equities represent 50 percent of the Fund’s investment while small cap represents 13 percent. International equities and fixed income represent 13 percent each. TIPS reflects 5 percent of the total investment while the cash asset is at 4 percent.

The Fund’s investment is handled by 10 money managers, which report regularly to Merrill Lynch. These include Atalanta, Sabre, S&P 500 Idex Fund, Stratem, Renaissance, Nicholas-Applegate, Gabelli, EAFE ETF, Templeton, Provident, and IRM.

Fund investments went up by 4.2 percent from $366.3 million in October 2004 to $382.9 million in November 2004. Fund administrator Karl T. Reyes attributed the growth then to the “good showing” in the energy sector.

Before this, the investments rose by $21 million or about 6 percent in October 2004 compared with September. Merril Lynch records show that investments as of Oct. 31 totaled $366.3 million from September’s $345 million.

Reyes had said that the October growth may be attributed to recent changes in the composition of money managers and equity sharing strategies.

In October, he said, the Fund began to put money under Treasury Inflation-Protected Securities or TIPS, a special type of bonds considered to be the safest type of investment in the world.