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States reserves fare better than the FTSE

20 November 2008

The Treasury has released figures showing that despite the troubled financial climate, the States three main savings funds have fared well.

The Island ’s long term investments, the Strategic Reserve and the Social Security Reserve Fund, have so far weathered the turmoil well and performed better than the FTSE. No States funds were invested in any of the troubled Icelandic banks and both reserves hold healthy balances. 

Although these are turbulent financial times and the value of the funds are changing on a daily basis the Strategic Reserve dropped in value by only four per cent (current value £502 million) and the Social Security Reserve Fund fell by 22 per cent (current value £529 million) up to the end of October this year, compared to the end of last year. In comparison, over the same period to October 2008 the FTSE 100 index fell by 32 per cent.    

The Stabilisation Fund, a shorter term fund, does not invest in shares so it has not suffered from the recent market volatility.

The aim of the Strategic Reserve Fund is to secure long-term gains through a low risk investment policy with advice provided by a suitably qualified Investment adviser.  The investment portfolio is actively managed; 30 per cent is invested in equities, and 70 per cent is invested in government bonds, corporate bonds and cash.  Despite the current downturn in the financial markets the Fund has grown by approximately 5 per cent per annum over the last 4 years.  

The Social Security Reserve Fund currently holds the equivalent of more than three years worth of payments from the fund and current social security pension payments are secure.

Money is not expected to be needed from the Social Security Reserve Fund for at least the next five years (based on the last actuarial review), so the investment policy aim is to secure longer term growth in the fund. Furthermore, because the reserve is a ‘buffer’ to deal with the longer term funding of Social Security pension payments, the value of its assets can fluctuate from year to year without affecting those payments. Over the last 5 years the Social Security Reserve Fund has grown by approximately 7 per cent per annum.

Quote from Senator Le Sueur:

“In the current financial markets I am satisfied with the strategy within which the Funds are being managed. Although the performance of the funds must be assessed over the longer term we are not being complacent and both the Treasurer and I will continue to monitor the situation and take appropriate advice from our Investment Manager. 

The Strategic Reserve is a long term Reserve and the funds held in it are not required to cover expenditure at this time.  Social Security payments are currently being met from contributions and not from money held in the Reserve fund.  There is therefore no need to release any of the assets held in these funds to meet on-going payments.”

-ends-

Notes to Editors:

1.      For further information please contact the Minister for Treasury and Resources, Senator Terry Le Sueur on 07797718798, after 5pm today.

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