Investment Portfolio of Maldives Retirement Pension Scheme

The Maldives Retirement Pension Scheme (MRPS), administered by the Pension Office, is a vital program aimed at providing financial security to retirees. With a strong focus on preserving capital and achieving growth in line with the Maldivian economy, MRPS adopts a carefully crafted investment philosophy. Let’s look into the investment strategies and performance of the MRPS, shedding light on its risk management approach and available member choices.

Investment Philosophy and Asset Classes

The primary goal of MRPS is to preserve the capital value of member contributions while striving for growth at a rate higher than domestic inflation. To achieve this objective, MRPS funds are invested in asset classes allowed under the Pension Act of Maldives. These assets encompass:

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1. Bank accounts and monetary funds licensed by relevant regulatory authorities.

2. Securities issued by the Government of Maldives.

3. Securities issued by business entities listed on a licensed stock exchange.

4. Mutual and investment funds licensed by relevant regulatory authorities.

MRPS assets may be invested in both domestic and overseas markets within the listed asset classes.

Investment Process and Risk Management

Before any investment is made, rigorous due diligence is undertaken for both public and private sector investments. The Investment Committee thoroughly assesses all investment proposals based on internal due diligence frameworks and industry standards.

In addition to evaluating counterparty risks and other investment-specific risks, inherent risks in investments are acknowledged, as investment returns and asset capital preservation are dependent on market performance and macroeconomic conditions. MRPS has implemented a robust risk management regime to monitor and minimize investment risks. Internal controls through independent internal audits and performance monitoring by the Pension Office ensure transparency and adherence to regulatory guidelines. External controls, such as inspections conducted by the Capital Market Development Authority (CMDA), further strengthen the oversight process.

Member Choices: Investment Funds

MRPS Investment Fund

Investments made in this fund are diversified across various multi-asset classes, including Treasury Bills, Treasury Bonds, Corporate Bonds, Equities, and Bank Deposits. The goal is to achieve a return above the local inflation rate while maintaining capital value.

MRPS Shariah Fund

For members seeking Shariah-compliant investments, the Shariah Fund offers investment in assets considered Shariah-compliant by competent Shariah authorities approved in Maldives. The fund aims to beat the local inflation rate while preserving capital value through investments in Shariah-compliant assets, such as General Investment Accounts (GIAs), Equity and Corporate Sukuk (Shariah Bonds).

MRPS Strategic Asset Allocation (SAA)

Diversification and optimal risk-adjusted returns have been a top priority for the Pension Office. Initially, a significant portion of the scheme assets was invested in short-term assets like one-year Treasury Bills. To reduce volatility and engage in longer-term investments, the Investment Committee encouraged the issuance of longer-term investments, particularly Treasury bonds targeted at MRPS.

The current strategic asset allocation aims to allocate 80% of fund assets into Growth Assets (Equities, long-term fixed-income securities and Open-ended funds) and the remaining as Cash or Cash Equivalents (CCE). The Shariah Fund has a maximum cap of 70% allocated to Growth Assets (Shariah Equity and Sukuk). In contrast, the post-retirement funds (Conservative and Shariah Retirees Fund) maintain 100% of their assets invested in CCE investments, prioritizing stability and liquidity.

Performance of Funds

All MRPS funds operate as unitised funds, where members’ proportional share of assets is represented by units. Units are allocated upon contributions and investment gains, and units are redeemed during fund transfers and upon exit. Individual member balances are valued based on the fund price, enabling efficient tracking of performance.

The Maldives Retirement Pension Scheme demonstrates a calculated and strategic approach to investments. By adhering to investment guidelines, conducting thorough due diligence, and employing robust risk management practices, MRPS endeavours to secure the financial future of its contributing members while navigating the ever-changing economic landscape.