From NASFUND Newsletter
Doing the talk, doing the walk
This month NASFUND will show case its property development programme which is the largest of any locally owned company in Papua New Guinea. Importantly we provide an insight into our investment thinking and how so far we have stayed ahead of the property curve.
Higher interest rates, with even further rate rises looming in a backdrop of continued international uncertainty can give concern to any one with an interest in property. We explain to members in this edition why the word caution remains the most important advice anyone can give as the country enters a significant drop in international tax receipts and revenues brought on by the downturn in commodity prices. Like equities, property has shown to be a strong long tern investment but in the short term, risks present them selves and at the end of the day, timing is a crucial element in getting the return equation right.
Construction that is relevant for the new Century
Much of the countries property stock is 35 to 40 years old. This stock is very quickly diminishing in value due to it being more assessed as land value, with the only meaningful course of action being demolition and rebuild. The market for old commercial buildings outside an historical context or for the intention of demolition and rebuild has diminished and this is set to continue as new stock hits the market place.
Recent attempts by some institutions to renovate existing aging stock is really about throwing good money up against the wall or as one property expert stated, “trying to dress up mutton as lamb.” The NASFUND approach is about ensuring that our property stock is new and relevant for this century with lifts, air-conditioning, along with smart amenities at the forefront of any new build.
NASFUND’s Eight and Nine-Mile Estates, Port Moresby – a legacy
The other exciting NASFUND led development has been in the way of residential housing. NASFUND has with its partners Consap Developers kick-started, residential housing estate development in Port Moresby in 2007. Phase one, delivered 32 houses at Eight-Mile which have all been sold and another 62 houses at Nine Mile, currently pre selling or in the process of being sold. NASFUND is pleased that other institutions are following our lead. Housing is a national issue and we are please to have led the way in meeting this challenge.
NASFUND will launch a stage three at Eight-Mile, later this year covering initially another 30 houses. More details will be forth coming.
NASFUND a job creator!
Finally, governments around the world are implementing stimulus packages to boost demand within their failing economies. The PNG government has also recently begun discussing its own stimulus package. NASFUND added the jobs that it has created with its construction program, with over 1, 000 direct jobs and through a multiplier effect of indirect job creation; we are looking at a stimulus of 3, 000 local jobs. Not bad for your No.1 Super Fund!
NASFUND has shared the development work among five construction companies. It is imperative that we have a vibrant construction industry and the best way to do it is to spread the work among the best.
The economic crisis with its increasing volatility means that more importantly than for a long time, much more work is required by investment managers, financers and superannuation funds on risk management. NASFUND has for many years been well disciplined when it comes to risk management. Every year, the NASFUND Board reviews risk; what variables affect the portfolio and what measures are in place to minimise risk. This year is no exception with the 2009- 2010 risk management draft finalised in mid March for board review. The 43 page document is a comprehensive review of portfolio risk and importantly with a plan to manage and minimise risk within your Fund over 2009 and beyond.