PORT OF SPAIN, Trinidad, CMC—The Trinidad and Tobago government says the total net asset value of the Heritage Stabilisation Fund (HSF) as of the end of September last year was US$6,087.9 million, compared to US$5,761.3 million as of June 30, 2024.
The HSF is a sovereign wealth fund established in March 2007. It was previously known as the Interim Revenue Stabilization Fund, which was established in 2000.
The HSF is a long-term fund with two distinct elements: a stabilization component to insulate fiscal policy from fluctuations in energy sector revenues and a savings component for future generations. More emphasis will be placed on the savings component of this Fund.
According to the Quarterly Investment Report released by the Ministry of Finance from July 2024 to September 2024, the HSF’s total value was US$6,087.9 million. Of this total, the Investment Portfolio was valued at US$6,086.1 million. The remaining portion was held in operating cash accounts to meet the day-to-day expenses of the Fund’s management.
“For the September 30, 2024 quarter, the HSF’s Investment Portfolio returned 5.74 percent and outpaced its benchmark, which increased by 5.44 percent. The declining interest rate environment provided a favorable backdrop for bond and stock markets. Over the period, strong gains in the US fixed income and developed equity markets contributed to the Fund’s positive performance.”
The report said the HSF outperformed by 30 basis points compared to its Strategic Asset Allocation (SAA) benchmark.
It said excess returns were driven by relative asset allocation positioning. In aggregate, the HSF’s more significant exposure to stocks—mainly the US Core Domestic Equity mandate—outweighed the negative effect of the Fund’s under-allocation to fixed income.
“Collectively, external managers’ strategies were broadly neutral. While the US Short Duration and Non-US Core International Equity mandates exceeded their respective market benchmarks, this was offset by the underperformance within the US Core Fixed Income and US Core Domestic Equity mandates.”
During the quarter, the relative deviations of the mandates’ weights from the approved SAA were maintained and reflected market value movements. As of September 30, 2024, all the mandates held weights above the allowable +/—5 percent deviation.
Following the rebalancing exercise in December 2023, the HSF Board determined that the Fund’s current asset allocation remained appropriate. The Central Bank will continue to monitor the Fund’s asset class exposures and provide regular updates to the Board.
The report noted that the main risks for the HSF portfolio are credit, concentration, interest rate, and currency risks.
Concentration or diversification risk is minimized by investing across various asset types and holding many positions within an asset class. The aim is to reduce risk and/or maximize return by investing in a broad cross-section of asset classes and positions that react differently to the same market event.
The respective portfolios manage Interest rate risk using a weighted average practical duration limit. For the US Short Duration Fixed Income mandate, the allowable range is six months longer or shorter than the weighted average duration of its respective benchmark.
Currency risk is managed by containing and controlling the exposure to non-US dollar instruments. For the fixed-income mandates, no more than 10 percent of the portfolio’s market value can be invested in securities denominated in currencies other than the US Dollar.
The report noted that at the end of September 2024, this portfolio’s currency exposure was 97 percent of its market value. During the quarter, all the portfolios were within their respective limits.
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