Panama sovereign fund mulls allocation to PE

Panama’s sovereign wealth fund, with about $1.4 billion of assets, is considering carving out an allocation to alternative investments, including private equity, according to Abdiel Santiago, chief executive officer and chief investment officer of Fondo de Ahorro de Panama.

The fund was set up in 2012 and is funded with revenue from the Panama Canal, the Sovereign Wealth Fund Institute says. The fund is invested in equities and fixed income, Santiago told the audience at the 2017 Global Private Equity Conference hosted by International Finance Corp in partnership with the Emerging Markets Private Equity Association in Washington.

The Panama fund was set up as a separate organization with an executive management team. The fund’s board is made up of private-sector professionals.

Staff is assessing what kind of alternatives it wants in the portfolio, from hedge funds to real assets, venture capital and private equity, Santiago said.

On the sidelines of the conference, he said PE will probably be part of the mix. Staff will come up with policies for allocations levels, and its exact definition of alternative investments, over the next few months, he said. “It’s not less than six months,” he said. “We still have a lot of work to do.”

On the same panel, Hideya Sadanaga, head of the PE-investment department at Japan Post Bank, said the financial institution is gradually willing to accept more risk in its program. Japan Post Bank, primarily a savings institution, first started committing to private equity last year.

The bank at the end of 2016 received approval to target emerging markets PE, which it will do through consultants and funds-of-funds, Sadanaga said. “It’s an important sector of growth we need to pursue … but we need to be careful with it,” he said.

Returns in emerging-markets funds have been down, he said, but that “makes us more confident now is the time to go in,” Sadanaga said.

Action Item: Read more about Panama’s fund here: www.swfinstitute.org/swfs/fondo-de-ahorro-de-panama-fap

Chile President Michelle Bachelet and Panama President Juan Carlos Varela walk past a honor guard at the government house in Santiago, Chile, on April 25, 2017. Photo courtesy Reuters/Ivan Alvarado