FSM, RMI's Trust Funds suffer losses due to pandemic crisis
The financial and economic disruptions caused by the Covid-19 pandemic have affected the Trust Fund for Federated States of Micronesia and the Republic of Marshall Islands, according the trust fund committees of both countries.
For the January-March 2020 quarter, the Fund for FSM lost 13.46 percent, below the benchmark of -13.07 percent. The net asset value of the Fund was $662,163,753, preliminary and unaudited as of March 31.
For the same period, the Fund for Marshall Islands lost 14.95 percent, above the benchmark of -16.19 percent. The net asset value of the Fund was $417,902,045, preliminary and unaudited as of March 31.
The Trust Funds are governed by the Trust Fund Agreement, a subsidiary agreement of the Compacts of Free Association. The funds are intended to “contribute to the economic development and long-term budgetary self-reliance of FSM and RMI by providing an annual source of revenue for education and health care. The trust funds, set to expire in 2023, are financial instruments based on market performance and not assured amounts as a multi-year fixed grant program.
The committee for both countries held separate virtual meetings to evaluate the trust funds' investment performance for the first quarter of the year and get current market update amid the Covid-19 pandemic that has taken is toll on the global economy and financial markets.
According to the FSM committee, the nation's Fund recovered in April with a gain 6.6 percent for the month. As of Oct. 1, 2019, the Fund was down 2.4 percent and ended the month with a net asset value of $705,858,535, preliminary and unaudited.
The Committee reviewed and approved adjustments to the Investment Policy Statement to guide the asset allocation and glide path to fiscal year 2023, including adding updated capital market assumptions.
The Committee approved a service proposal from the Fund’s auditor, Baker Tilly LLC, to conduct the Fund audits for fiscal years 2020, 2021 and 2022. The committee also noted the current status of bilateral negotiations between the U.S. and FSM governments, including distribution policy and Trust Fund issues post 2023.
For Marshall Islands, the Fund received a U.S. contribution of $5 million on Feb. 19. and $2.4 million from Taiwan on April 20.
The RMI's trust fund recovered in April with a gain 7.32 percent for the month. But as of Oct .1, 2019, the Fund was down 2.38 percent and ended the month with a net asset value of $450,894,119, preliminary and unaudited.
The next quarterly meetings will take place in late August or early September 2020.