Investment

Why this matters

As a retirement savings fund, we adopt a strategic approach to investments that seeks to appropriately price in the risks of investing versus expected returns. We 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 decides on 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 management expenses and taxation, but before reserves allocation (if any) of Consumer Price Index (CPI) plus 2% over any five-year period. The Fund aims to achieve this returns objective with a reasonable degree of certainty, by requiring the expected probability of a negative return to be not more than four years in twenty. 

To that effect, the Fund has developed and reviews its Investment Strategy and SAA at least annually to guide our efforts. The SAA captures our target asset allocations, prospective returns and associated risks correlations, and the liquidity requirements of the Fund’s investment portfolio against its liability profile.

How we create value

Our investment approach is the key to the long-term growth of Members’ funds. In pursuing this objective, Nambawan Super continues to invest in a range of assets locally which provides broader benefits to PNG by building much needed infrastructure and creating jobs. 

A significant proportion of Member funds are invested in well-known brands in PNG such as BSP Financial Group, Credit Corporation, Post Courier, Holiday Inn, Toyota Tsusho (trading as Ela Motors), City Pharmacy, SP Brewery and Paradise Company which manufactures EmNau biscuits,
Queen Emma chocolate and Gala ice cream. Not only are our Members getting good returns from our investment in these businesses, but 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 a prudent and professional environment. We do not invest in businesses that run against the best interests of PNG and ultimately our Members. We pride ourselves in our integrity and trustworthiness, and our governance and accountability processes to preserve and grow Members’ funds for their retirement benefit.

Diversification

We invest Member 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 do badly in any given period from other assets in the portfolio which might do well during the same period. Member retirement savings are mainly invested in local Government securities, domestic commercial and residential property, and local and international companies. Over the past decade, we have also patiently built up our overseas investments, which enables us to access a much wider range of investments not otherwise available in PNG. 

Locally-based

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 education. 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.

Legislation

The legislation governing the superannuation industry in PNG is the Superannuation (General Provisions) Act 2000 (the Act). The Bank of Papua New Guinea (BPNG), is our regulator pursuant 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 Nambawan Super and our Licensed Investment Manager (LIM), Kina Funds Management Limited (KFM), through regular reviews and comprehensive
reporting requirements. 

Nambawan Super in consultation with KFM, our LIM, work 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. 

Investment Strategy

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 in excess of inflation 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 for 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:

1. The risks involved in making and holding an investment under each of the different categories of
   investment baskets or asset classes;
2. The likely returns from each asset class, including the distribution of returns on each asset class, understanding that investment returns (especially for riskier investments such as equities and property) are volatile and not the same each year, and may indeed be negative in certain periods;
3. The contribution of returns in the portfolio and as a whole, taking into account the diversification of the Fund’s assets given the different correlations, to ensure adequate risk mitigation;
4. How liquid each investment is and the liquidity profile of the portfolio as a whole; and
5. The Fund’s cash flow requirements in line with its liability profile and liquidity characteristics of its assets.

Securing our Members' Future

Superannuation is a long term investment and rewards consistent savings accrued over the long-term. Nambawan Super follows international best practice and has a disciplined investment approach which is designed to withstand some of the head-winds in a constantly evolving
global and local investment environment and protect investment savings 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 the pool of 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 Coronavirus 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 and liquidity 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 to Members.

The Trustee Board has in place a sensible Investment Strategy, focused on maximising returns whilst balancing risk, and at the same time ensuring enough cash will be available to pay Members as they retire and exit the Fund.