AT the end of fiscal year 2019, the balance of the Settlement Fund’s investment accounts was $98.26 million, trustee Joyce CH Tang stated in her report to the federal court.
The balance as of Oct. 31, 2021 was $130.509 million or a gain of $32.2 million, Tang added.
“The investment portfolio for FYTD September 30, 2021 period returned 8.88%, compared to an actuarial expected return of 3.5%. The return for the month of October, the start of FY 2021, was 0.87%,” she said.
Tang noted that the Settlement Fund investment balance as of Oct. 31, 2021 had surpassed the beginning balance of FY 2014 and the investment trend continues to increase.
“As the world navigated through disruptions brought about by the global pandemic in the past two years, the financial markets went through episodes of extreme volatility and liquidity squeeze,” Tang said.
“Central banks around the world rushed to the rescue through injection of cash and intervention of the market,” she added.
“Many market sectors experienced distortion of valuation and unusual trading activities,” she said.
“During this turbulent period, the Settlement Fund’s investment portfolio performed steadily free of stress, which is attributable to its focus on high quality, ample liquidity, and sufficient diversity. After a review of the investment management expense, the Settlement Fund replaced its high yield bond manager at the beginning of 2021, resulting in fee savings of over $75,000 annually. With the guidance of Wilshire Advisors, the Settlement Fund has achieved a return of 8.8% for this fiscal year. As of October 31, 2021, the balance in the Settlement Fund’s investment account was $130,509,577 — surpassing the initial corpus on December 31, 2013, by nearly 25%,” Tang said.
“Looking forward, however, the outlook remains challenging. As inflation pressure builds in the economy, the Federal Reserve will inevitably tighten availability of liquidity by raising interest rates. This will impact performance of all asset classes, equities and fixed income included,” she said.
Tang said the Fund continues to review “the available opportunity set that is suitable to the Fund’s conservative risk profile, and is currently pursuing an investment program portfolio that ensures ample liquidity and sufficient diversification.”
Tang also informed the court that despite the Covid-19 pandemic, the CNMI government “has been diligent” in making weekly payments. “This has enabled the Settlement Fund to avoid drawing down on investments and to invest its reserves,” she added as she expressed her appreciation for the commitment and dedication of Gov. Ralph DLG Torres and Department of Finance Secretary David DLG Atalig to meeting the CNMI government’s financial obligations under the settlement agreement.
In 2009, retiree Betty Johnson sued the CNMI government for its failure to pay the amount that it was required by law to pay to the NMI Retirement Fund since 2005.
Johnson said the Fund would run out of money by June 2014 and would no longer be able to pay retirement benefits.
In September 2013, the parties agreed to settle the lawsuit and the federal court approved a $779 million consent judgment in case the CNMI government did not meet its obligations to the Settlement Fund.
The Settlement Fund was created by the federal court as part of the settlement between the CNMI government and retirees.
The federal court appointed Tang as Settlement Fund trustee on Sept. 25, 2013.
