WASHINGTON, D.C. (April 3rd, 2019) – The Trust Fund Committee of the Trust Fund for the People of the Republic of the Federated States of Micronesia (the Fund) conducted its fiscal year 2019 (FY19) second quarter meetings on April 1st, 2019.
The meeting covered the Fund’s investment performance for the October-December 2018 quarter as well as the January-February 2019 period, a review of the Fund’s FY18 annual report and audit, adjustment of the Investment Policy Statement and investment fee schedule, and distribution policy for post FY23.
For the October-December 2018 quarter, the Fund lost 7.4%, net of fees, and had an ending net asset value of $618,026,379. Losses were due to volatility caused by U.S. and global economic and finance uncertainty, especially in late December. During the quarter, a U.S. government annual contribution, per the schedule of the Compact of Free Association, as Amended, in the amount of $32,242,320 was deposited on October 2nd, 2018.
As of February 28th, the Fund had gained back most of the first quarter losses and was down 1.5%, net of fees, for the fiscal year-to-date (October 1st, 2018 to February 28th, 2019). The total asset value was $657,924,104 as of February 28th, 2019.
The Fund’s independent auditor, Baker Tilly, presented the Fund’s FY18 Audited Annual Financial Statements. The audit was conducted per U.S. Generally Accepted Auditing Standards (GAAS) and Generally Accepted Government Auditing Standards (GAGAS). There were no negative findings or disclosures identified in the audit.
The FY18 Annual Report was presented to the Committee. The Fund ended FY18 (September 30th, 2018) with a restricted fiduciary net position of $636,086,452 compared to $564,970,738 as of the end of FY17. The gain was due to investment earnings and the annual contribution from the U.S. government. The Fund had an annual weighted rate of return of 6.8% for FY18 compared to 13.8% for FY17. The Committee approved the Annual Report and authorized dissemination of the Annual and audited financial statements to the respective governments. The full report and other information on the Fund may be accessed on the Fund website at https://fsmcfatf.com.
The Committee approved a revised Investment Policy Statement and fee schedule with Mercer Investing Management, the Fund’s Investment Adviser. The Investment Policy Statement was adjusted to include changes to the U.S. small/mid cap, emerging markets and fixed income asset strategies. These changes together with a reduced Mercer advisory fee schedule and elimination of the non-discretionary management will result in a reduced percentage of annual fees paid by the Fund for the Investment Adviser and money managers.
To address the formulation of a distribution policy and other issues regarding the Trust Fund Agreement for the post FY23 period, the Committee agreed to appoint a subcommittee to determine options for the Committee to review and consider. Future discussion will be held regarding the membership and terms of reference of the subcommittee.
As provided for under the Compact of Free Association agreements, as amended (U.S. Public Law 108-188), the Fund was established to contribute to the economic advancement and long-term budgetary self-reliance of the people of the Federated States of Micronesia when annual grant assistance under the Compact expires after fiscal year 2023.