Ninety-five per cent of the reserves of the National Insurance Scheme (NIS) are invested in various areas of Barbados.
Director of the NIS Ian Carrington said while this is not an ideal situation to have, given the challenges the country is facing in terms of it foreign exchange position, it is the best alternative for the time being.
“We have taken the view that these finds should develop Barbados. But we also recognize that there comes a point in time when you have to start diversifying some of your resources from within the domestic space. This has a lot to do with the fact that though you will still have persons working, you would only have enough to generate the kind of income in the country to support all of the elderly persons,” Carrington said.
“ . . . back in 2004, the National Insurance Board started that process of diversification, away from Barbados, by essentially employing four investment consultants who manage a stable of investment managers on our behalf and they are required to invest those monies that we have provided for them only in the area of equities because we are over exposed in the area of bonds,” he revealed to delegates on the final day of the 76th Annual Barbados Workers’ Union Delegates Conference at Solidarity House.
The NIS Director noted that with the global meltdown of the financial markets in 2007 and the accompanying challenging thereafter, their investment portfolio in the international market has been performing well.
“When we blend it all together we have an equity portfolio that is expected to give us a return of seven per cent after inflation and it has in fact been given us that return even in the face of the fact that there has been a downturn in the market . . . on an annual basis. Actually, it will deliver ten per cent on an annual basis collectively,” Carrington said.
“Now the issue there is that we have not made any additional investment into those external equity portfolios in the last four to eight years and that has had to do with the fact that we have not been getting the approval of the Central Bank for the utilization of foreign exchange and that has to do with the fact of the state of the foreign exchange,” Carrington stated.
He explained that the alternative would be to leave the money in the banking sector on a current account earning zero or invest it in the current economic space to get some return.