An­tho­ny Wil­son

As was not­ed in this space in the April 11 (Week Two) edi­tion of the Busi­ness Guardian, in a com­men­tary head­lined, "Is T&T's mid­dle class be­com­ing poor­er?" this coun­try's high in­fla­tion rate and low in­ter­est rate en­vi­ron­ment is hav­ing a per­ni­cious im­pact on the prospects of mid­dle in­come wage earn­ers.

The ba­sis of that ar­gu­ment is that if the rate of in­fla­tion in T&T is 8 per cent, peo­ple who save their mon­ey in de­posit ac­counts or in in­come funds–which are all pay­ing out less than 2 per cent in­ter­est or dis­tri­b­u­tion a year–are in ef­fect ex­pe­ri­enc­ing a de­cline in the val­ue of their mon­ey over time.

And there is a def­i­nite pref­er­ence for low in­ter­est rate in­come funds in this ju­ris­dic­tion. Ac­cord­ing to the UTC's 2012 an­nu­al re­port–and it is very im­pres­sive that its fi­nan­cials are avail­able and on its Web site so quick­ly–the cor­po­ra­tion's funds un­der man­age­ment at the end of 2012 amount­ed to $22.06 bil­lion. Al­most ex­act­ly half of the UTC's funds un­der man­age­ment, some $11.15 bil­lion, is parked in its TT Dol­lar In­come Fund.

UTC chair­man, Wen­dell Mot­t­ley, in his re­port said: "High sys­tem liq­uid­i­ty cou­pled with do­mes­tic in­vest­ment op­por­tu­ni­ties that were few and far in be­tween, re­sult­ed in a sta­ble re­turns of 1.33 per cent through­out the year for the TT Dol­lar In­come Fund."

What Mr Mot­t­ley is say­ing is that half of the mon­ey that the UTC man­aged last year earned 1.33 per cent, which was well short of the coun­try's in­fla­tion rate of 8 per cent in 2012 .

It is note­wor­thy that while 50.54 per cent of the UTC's funds un­der man­age­ment were held in its TT Dol­lar In­come Fund, on­ly 16.68 per cent of the UTC's funds, to­talling $3.68 bil­lion, were in­vest­ed in its Growth and In­come Fund, which the cor­po­ra­tion de­scribes as its "flag­ship."

The UTC's Growth and In­come Fund, which re­ceived $379.2 mil­lion in new mon­ey last year, pro­duced a net re­turn to its unit hold­ers of 6.24 per cent, com­pared with its 2011 re­turn of 7.58 per cent. The fund's as­set al­lo­ca­tion for 2012 was 43 per cent do­mes­tic and re­gion­al eq­ui­ties, 23 per cent in­ter­na­tion­al eq­ui­ties, 23 per cent bonds and 11 per cent mon­ey mar­ket in­stru­ments.

Giv­en the fact that the UTC is T&T's pre­mier in­vest­ment in­sti­tu­tion and that half of the in­sti­tu­tion's funds un­der man­age­ment earned a 1.33 per cent re­turn in 2012, there would be some who would ar­gue that Mr Mot­t­ley is pre­sid­ing over an in­sti­tu­tion that is tan­gen­tial­ly re­spon­si­ble for the de­cline in the wealth of thou­sands of mid­dle-in­come Tri­nis, as it does not ap­pear to be do­ing enough to per­suade savers out of their ul­tra-con­ser­v­a­tive, preser­va­tion-of-cap­i­tal mode.

The pur­pose of this piece, of course, is not to beat up on Mr Mot­t­ley–who I con­sid­er to be a fi­nan­cial icon of T&T (Yale/Tokyo Olympics/Cred­it Su­isse) as he was the Min­is­ter of Fi­nance in April 1993 when T&T float­ed its ex­change rate and lib­er­alised its cap­i­tal ac­count–but to sug­gest to him that he should be at the fore­front of those lob­by­ing the Gov­ern­ment to em­bark on a pro­gramme of pri­vati­sa­tion of the coun­try's prof­itable state-owned com­pa­nies.

Such a pro­gramme would al­low in­di­vid­u­als to trans­fer some of the mon­ey that is now be­ing held in in­come funds and de­posit ac­counts in­to eq­ui­ty-based funds, which would pro­vide them with greater pos­si­bil­i­ty of achiev­ing a re­turn on their in­vest­ment that sur­pass­es the rate of in­fla­tion.

The ra­tio­nale is that if thou­sands of mid­dle-in­come wage earn­ers in this coun­try con­tin­ue to keep their sav­ings in in­come funds earn­ing 1.33 per cent, what hope would they have of re­tir­ing with nest eggs that al­low them to sup­ple­ment the pen­sions they re­ceive from their work­places and from the Na­tion­al In­sur­ance Board.

And the NIB is an­oth­er in­sti­tu­tion that should be at the fore­front of lob­by­ing the Gov­ern­ment to pri­va­tise.

In its lat­est an­nu­al re­port, un­for­tu­nate­ly for the year end­ed June 30, 2010, the Na­tion­al In­sur­ance Board dis­closed that it paid out $2.18 bil­lion in na­tion­al in­sur­ance ben­e­fits to ben­e­fi­cia­ries who in­clud­ed 77,270 re­cip­i­ents of re­tire­ment pen­sions, ac­count­ing for 81 per cent of the to­tal pay­ments.

The so­cial se­cu­ri­ty ser­vice col­lect­ed $2.65 bil­lion from 482,839 con­trib­u­tors and it earned $997 mil­lion in in­vest­ment in­come from its port­fo­lio.

At 27.1 per cent, eq­ui­ties ac­count­ed for the largest share of the NIB's in­vest­ment port­fo­lio in its 2010 fis­cal year, and the board owned $6.15 bil­lion in quot­ed eq­ui­ties.

Among its eq­ui­ty in­vest­ments, NIB owns 51 per cent of T&T Mort­gage Fi­nance and 51.3 per cent of the Home Mort­gage Bank. Hope­ful­ly, by the end of this year, the NIB will have the op­poruni­ty to mon­e­tise its share­hold­ing in those com­pa­nies when they are merged and shares in the new en­ti­ty, which is to be called the T&T Mort­gage Bank, are sold to the lo­cal pub­lic.

The Ini­tial Pub­lic Of­fer­ing of the TTMB would pro­vide the NIB with a great deal of cash from the pro­ceeds of the sale of shares.

What is the NIB go­ing to do with that cash?

Put it in an in­come fund earn­ing 1.33 per cent or a de­posit ac­count earn­ing 0.5 per cent?

Or will the NIB have the op­por­tu­ni­ty to in­vest its cash from the pro­ceeds of the sale of TTMB in new eq­ui­ties that the Gov­ern­ment has made avail­able to the T&T mar­ket? Such an in­vest­ment in new eq­ui­ties will al­low the NIB to aim at achiev­ing re­turns that beat in­fla­tion so that that the in­sti­tu­tion is sol­vent enough to con­tin­ue in­creas­ing ben­e­fits every few years AND pay pen­sions to all re­tirees in 2033.

The pol­i­cy so­lu­tion may be for the UTC and the NIB to start a con­ver­sa­tion about the two in­sti­tu­tions lead­ing a sea change in the at­ti­tudes of lo­cals to the bal­ance be­tween risk and re­ward in terms of per­son­al fi­nan­cial plan­ning.

If the Gov­ern­ment de­cides that it wants to mon­e­tise its stake in Cli­co by sell­ing the in­sur­er's 42 per cent stake in CL World Brands, its 32 per cent stake in An­gos­tu­ra and its 56 per cent stake in Methanol Hold­ings (Trinidad) Ltd–if the ar­bi­tra­tion pan­el ever re­ports on this mat­ter–to the in­di­vid­u­als and in­sti­tu­tions of T&T, an in­vest­ment hold­ing com­pa­ny should be set up to fa­cil­i­tate this trans­fer of as­sets.

And T&T does not need to re-in­vent the wheel as it has ex­pe­ri­ence of the es­tab­lish­ment of Na­tion­al En­ter­pris­es Ltd more than a decade ago, which has al­lowed thou­sands of lo­cals to ex­pe­ri­ence sig­nif­i­cant cap­i­tal gains and a steady stream of div­i­dends.

In his chair­man's re­port for 2012, NEL's Ken­ny Lue Chee Lip boast­ed of the fact that the com­pa­ny's share price jumped by 26.9 per cent to $14.78 at its 2012 year end and that it paid $0.70 a share in div­i­dends.

If the Gov­ern­ment wants to mon­e­tise CL Fi­nan­cial, maybe the best thing to do would be to go back to the fu­ture with a NEL 3.

The idea would be to col­lapse all of the CL Fi­nan­cial com­pa­nies in­to a new in­vest­ment hold­ing ve­hi­cle, which could then be sold to lo­cal in­vestors for the amount of mon­ey that the State has spent bail­ing out the con­glom­er­ate.

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