PHILIPSBURG–Disappointing results in the international investment portfolio of General Pension Fund APS, were the primary cause of the reduction in the coverage ratio of the fund in 2018.
This is the conclusion of the General Audit Chamber’s Compliance Audit of the 2018 financial statements of the APS.
The report was presented to Parliament on Tuesday. The report addresses findings and conclusions resulting from the review of the pension fund’s financial statement of 2018.
The Fund’s coverage ratio at the end of 2018 was 97.6 per cent (2017: 103.1 per cent). This means that in 2018, the Fund’s assets were insufficient to cover both general and investment risks.
According to the General Audit Chamber, while there was a positive result in 2017 of NAf. 22.5 million, during the fiscal year 2018, APS suffered a loss of NAf. 36.9 million. As a result, the coverage ratio decreased by 5.5 per cent as compared to 2017.
The General Audit Chamber believes that APS can take measures to benefit the Fund’s performance.
The General Audit Chamber recommends that APS carries out an Asset Liability Study (ALM study) to determine the need for adjustments to the Fund’s strategic investment policy. The objective of such a study is to provide insight into the relationship between expected proceeds from investments and the associated risks. An ALM-study normally analyses a fund’s entire financial strategy. The study can be used to recommend changes that can lead to improvement of the coverage ratio.
In its response, APS said a risk budgeting study is currently underway. The Audit Chamber believes that the execution of such a study is a positive development. However, the Chamber points out that a risk budgeting study is not a part of APS’ investment cycle, whereas an ALM-study is.
The report is published in both English and Dutch and is available on the website of the General Audit Chamber (www.arsxm.org). Readers are invited to use the digital glossary that is included in the report. It provides a supplement to explain jargon and technical terminology. By clicking on words shown in blue, the reader is automatically redirected to the glossary site.
Source: The Daily Herald https://www.thedailyherald.sx/islands/93408-disappointing-return-on-aps-intl-investments-cause-coverage-ratio-drop
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