MPLT Chairman Alvaro A. Santos told Variety that this proposal had been on their table for six to seven months until they decided not to fund the local high yield and alternative investments.
“Having considered all factors, we have decided that we should just suspend everything and wait and monitor developments,” Santos said.
During the meeting in April, the board decided in favor of suspending the local high yield program for six months or until further notice.
Citing the economic downturn, Santos said, “It’s in the best interest of the MPLT to suspend the local high yield program…until MPLT sees something favorable in the CNMI economic landscape.”
He added, “We created the local high yield program in which we would set aside $3.2 million in which we want to make available to any business in the CNMI. But we assess 11 percent interest rate.”
He said MPLT received several proposals “some of which we had to almost immediately turn down because they didn’t meet our criteria.”
“The one that came close to approval was Marianas Credit, a financing business. It has all the qualities of success,” he said.
Marianas Credit has very successful principals and associates were willing to put cash and real estate capital, he added.
He said they required 50 percent collateralization within the $3.2 million that was available in the program. MPLT, he said, had negotiated with Marianas Credit and it came to a point when they had fulfilled all the requirements.
“We look at the community — do they have the money? If they engage in consumer lending, are we sure that people will not fail in making payments, given the reduced work hours, people getting laid off, some migrating to other jurisdictions? It doesn’t look good.” Santos said.
For the MPLT chairman, “The business may succeed but will it benefit the community?”
MPLT, Santos said, the board considered all factors, especially the prospective borrowers’ ability to pay.
In suspending the local high yield program for six months or until further notice, the trustees decided in favor of the status quo.
In his investment consultant report, Bruce I. McMillan told the board that alternative investments and local high yield programs were unfunded and the MPLT was still in the process of sorting out the two asset classes.
“We decided to stay where we are until we reached those decisions,” McMillan told the trustees pertaining to the local high yield program and the alternative investments.
He said the money that was supposed to fund these two proposed asset classes was in the domestic fixed income core managed by Richmond.
He told the trustees that MPLT would have to do a rebalancing of the allocations. “But right now, it doesn’t make sense to rebalance.”
Based on the strategic allocations, local high yield program would be 5 percent while alternative investments would be 10 percent.
As of April 27, local high yield and alternative investments remained unfunded.
Earlier, the MPLT board considered funding the alternative investments as it evaluated proposals by three money managers: Houston Global, Aureos and Harbour Vest.
MPLT trustees unanimously decided during the February board meeting against Houston Global due to the absence of track record.
Owing to the high risk associated with investing in Aureos, the trustees likewise disapproved its proposal while it deferred action on Harbour Vest.
In March, MPLT decided to keep alternative investments unfunded and adopted an amended investment policy statements.
Also the MPLT decided to replace money manager PIMPCO with Templeton during the board meeting.
