PH Monday Macro: A quick look into what could potentially be the Philippine’s first investment fund
The Philippine’s first investment fund, called the “Maharlika Investment Fund” (MIF), has already been approved by Congress and is awaiting President Marcos’s signature for it to be a law and officially established.
Today, let us dive into what the Maharlika Investment Fund’s objectives are, where it will pull money, and what it will be able to invest in.
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The Maharlika Investment Fund is an investment fund in the Philippines that aims to generate, preserve, and grow national wealth. Its establishment serves various purposes, including job creation, economic growth, and the overall improvement of the welfare of Filipinos.
In many countries, investment funds are created to address specific needs. In the case of the MIF, Finance Secretary Benjamin Diokno describes it as designed to also serve “as an additional vehicle that would allow the government to tap surpluses that cannot be utilized under current legal frameworks.” Such an approach opens up opportunities for collaborative funding activities with foreign investors and multilateral institutions, facilitating the financing of capital-intensive projects.
While investment funds are often associated with traditional asset classes and financial securities, the Maharlika Fund sets itself apart. The bill allows the Maharlika Investment Corporations (MIC), responsible for deploying the fund, to invest in crucial programs related to health, education, research, and innovation. This broader scope of investments showcases the fund’s commitment to societal development beyond financial markets.
To effectively invest, any fund requires substantial capital. According to the bill, the initial funding for the MIF is set at PHP 75 billion. This capital will come from government-owned and controlled corporations (GOCCs), including institutions like the Land Bank of the Philippines, the Development Bank of the Philippines, and the National Government itself.
The National Government’s contributions will come in various forms, such as BSP dividends, income from the government’s share in PAGCOR, proceeds from the privatization of government assets, and other sources like royalties.
Prior to the final draft, the initial Senate bill forbade the allocation of pension and welfare funds for any obligatory contributions to the MIC but allowed the possibility for these agencies to invest in the fund at their own discretion.
However, in the final version of the bill, these fund agencies, such as the social security system (SSS), government service insurance system (GSIS), Philippine health insurance, and the home development mutual fund (Pag-IBIG), are excluded from subscribing to the sovereign investment fund.
The change was due to concerns that such agencies should not be allowed to contribute to the MIF. These funds have to prioritize the preservation, stability, and long-term growth of their assets and, therefore, generally refrain from engaging in speculative activities.
Overall, the MIF aims to ensure a coherent flow of capital, emphasize socially impactful investments, and uphold the responsible government capital risk management of pension and welfare funds. This framework allows the fund to effectively fulfill its objectives of generating optimal returns, promoting economic growth, and improving the well-being of the Filipino population, given the independence from the Philippine government.
In our next report, we will delve deeper into how the Maharlika Investment Fund is expected to contribute to the improvement of the economy and address external concerns. We will explore its potential impact on job creation, economic growth, and the overall welfare of the Filipino population.
Additionally, we will discuss the safeguards in place to ensure the responsible management of the fund and address any concerns regarding transparency, risk management, and accountability.
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“The Monday Macro Report”
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Understanding what kind of market we are in, what leading indicators we should be looking at, and what market expectations are, will make investing a less monumental task than finding a needle in a haystack.
Hope you’ve found this week’s macro chart interesting and insightful.
Stay tuned for next week’s Monday Macro report!
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