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8.64% Maharlika return on equity?


Sovereign wealth funds (SWF) are state-owned funds or entities that invest in real and financial assets to benefit current and future generations. Several nations have already set up their own SWFs, like Norway, Japan, China, Singapore, Abu Dhabi, Kuwait, Saudi Arabia and Qatar.


In the ASEAN, once the Philippines enacts the Maharlika Investment Fund Bill, it would only be Myanmar, Cambodia, and Laos that do not have a SWF.


Singapore’s GIC is one of three investment entities that manages the country’s foreign reserves. It manages most of the Singaporean Government’s financial assets, investing it for the long term. It supplements its government’s budget, allowing the state to support long term investments in education, R&D, healthcare, and the environment.


Meanwhile, the Norway Government Pension Fund Global, the largest sovereign wealth fund in the world, was set up to protect Norway’s economy from fluctuations in oil revenue. The aim of the fund is to ensure that the wealth the country produces from its oil reserves is invested and used responsibly so it can safeguard the country and its citizens’ future even when its oil eventually runs out.


President Ferdinand R. Marcos Jr. presented the Philippines’ proposed sovereign wealth fund at the World Economic Forum (WEF) early this year. He explained that the fund will be a tool to diversify the country’s financial portfolio, “which includes our existing institutions pursuing investment that will generate stable returns, but also welfare effects spanning employment creation, improvement of public service, and a decrease in costs of economic activities.”


Senator Mark A. Villar, principal author and sponsor of the Maharlika Investment Fund (MIF) bill, said that based on studies and projections, the Fund may possibly gain 8.64 percent return on equity every year in the next 10 years.


Villar explained that the MIF would provide a diversified source of revenue for the government outside of taxes and other sources, and as such, the government can increase spending on essential infrastructure projects that are necessary to promote economic growth and development.


The proposed measure will create the Maharlika Investment Corporation (MIC) that must establish a diversified portfolio of investments in the local and global financial markets and in other assets that promote the objectives of the Fund.


The senator further explained that to achieve such objectives, the MIC is envisioned to maintain two major sub-funds: Capital Market Investment Sub-fund, which will prioritize generation of returns from investments in a diversified portfolio of liquid assets; and Sectoral Investment Sub-fund that will en-gage in high-return projects that are relevant to country’s development.


If placements between the two funds are equally shared, the MIF may be able to get an 8.64 percent return on equity annually. As such, Villar said, this could grow the seed fund up to ₱229 billion by 2023.

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