The advice has divided business here: the Business Trade Investment Board has welcomed the proposal, but the Super Fund says the Cooks economy is too small to risk the savings of retired people.
The fund is entirely invested overseas, in New Zealand and global assets, despite regulations allowing 20 per cent of the fund to be invested within the country.
The Development Bank argues the Fund has an important role to play in the development of the domestic financial market, as a source of long-term investment capital.
The Fund’s domestic investment potential has been boosted by strong growth in net assets, which increased by an average of 13.7 per cent per year from $77.9 million in 2013 to $176.1 million today.
Chief executive officer Damien Beddoes said investing in the Cooks could pose risks to their investment, and they also did not want to compete with others local investors. Investing here was also complicated by the need to be a direct owner, as there was no public sharemarket.
That gave them less liquidity: it is harder to sell a company in a short period of time.
However Business Trade Investment Board chief executive officer Teariki Vakalalabure said there were some exciting opportunities in the local strategic asset market for the Fund to invest in.
These included telco Bluesky, which has 15 per cent of shares set aside for locals, and the energy sector. “These sectors are necessary for economic development of any country and also critical for the security of the country,” Vakalalabure said.
“It’s always crucial that we have our own ability to invest and have a say in those sectors.”
Vakalalabure also said petroleum and gas companies would benefit from local investment.
Triad Pacific Petroleum Ltd principal Chris Vaile agreed there was an opportunity to invest in fuel, but only a “very small” one.
Beddoes said the National Superannuation Fund was a long term investor, riding through the highs and lows of markets cycles. They provided retirement saves the option of lower risk, medium risk and higher risk funds.
“Direct investing, either in the Cook Islands or elsewhere does provide uncorrelated returns and can reduce volatility, depending on the investment, compared to the markets, but it also increases our investment risk. If an opportunity does meet our investment criteria, then as investors we would consider it on a commercial basis.
“Direct investing also requires additional investment resource and governance, so sector skills also become part of assessing the ability to not just buy in to a company, but be able to contribute to its strategies and depending on the scale of ownership, effectively manage the company should the need arise.”
However Beddoes said regionally, the Cook Islands Super Fund was part of the Pacific Islands Investment Forum which is a group of Superannuation, Trust, and Sovereign Funds, worth about $70 billion.
He said the Forum provided a pathway for co-investment for the Fund that is supported by the larger peer funds investment expertise, resource, and specialisation.
“This group is looking to work together to invest in commercially viable infrastructure in the Pacific region, including the Cook Islands, New Zealand and Australia.”