Posterity fund lost money on IIP fund investments

The national fund used to invest proceeds from the sale of Maltese citizenship lost €2.45 million in 2018, after money invested by the Central Bank in a portfolio of assets suffered a market downturn.

A 2.88% shareholding in Bank of Valletta was also valued at €20.3 million, having lost €7.1 million from the initial investment of €27.8 million.

In September 2018, the National Development and Social Fund concluded an investment agreement with the Central Bank to manage 30% of all the cash passed on to the fund by Identity Malta on the sale of Maltese passports to the global rich.

The initial investment passed on to the Central Bank stood at €100 million. 

But the building of the portfolio coincided with a market downturn towards the final quarter of 2018.

“Foreign markets suffered heavy losses... US equities registered the worst year since the financial crisis,” the NDSF said in its report on the year. 

The value of the portfolio now stands at €97.55 million, a loss of €2.45 million.

The Central Bank of Malta told MaltaToday the portion of funds reported to have lost value in 2018 was not invested directly by the Central Bank of Malta, but, in agreement with the National Development Social Fund, the investment management of these funds was outsourced to an internationally recognised global asset manager.

During 2018 the NDSF received €100.6 million from the Individual Investor Programme (IIP), bringing total funds in the posterity fund to €466.1 million.

Of the funds received from Identity Malta, 30% is given to the Central Bank to invest in high quality financial instruments to preserve capital.

The other 70% is used for social and development purposes and is administered by the NDSF’s governors, to fund social and economic initiatives which may have no direct financial return.

The NDSF said markets in 2018 proved to be volatile, with real returns across ten major asset classes have been mostly negative for the first time in 25 years.

The NDSF has also carried out investments in social housing and other charities, as well as financial investments.

In August 2018, NDSF acquired from Cypriot Popular Bank a 49.1% shareholding in Lombard Bank for €47.9 million, an investment which as the NDSF declares is not strategic but only served to facilitate the exit of the Cypriot shareholder from one of Malta’s established and respected banks and also the major shareholder of Malta’s postal service, Maltapost.

“It is a measure taken by NDSF in terms of its founding regulations to support business and enterprise, in this case an important operator in the domestic banking sector.”

The NDSF also invested a further €6.4 million in various equities and €3.4 million in various bonds listed on the stock exchange. 

Another €52.3 million were used to acquire Malta government stock, of which it later sold €45.5 million realising a profit of €189,000.

As at end 2018, the NDSF held €274 million in unallocated cash at the Central Bank.

The NDSF in 2018 also financed new medical equipment with a €950,000 grant, as well as having funded two major social housing projects and the Puttinu Cares charity’s London apartments, for a total of €55 million.