SSIF Assets reach JD 9.565 billion and Comprehensive Income increases to JD ‎‎222.3 million in the two months ending February 2018‎

Social Security Investment Fund (SSIF) Executive Chairman Suhair Al-Ali said that the Fund's performance has been strong with total assets reaching JD 9,565.3 million as of February 28th, 2018 compared to JD 9,237.9 million by the end of 2017, an increase of JD 327.4 million, or 3.5% in the first two months of this year. Moreover, assets increased by JD 1,035.1 million during the period from February 28th , 2017 - February 28th , 2018, representing an increase of 12%.

Al-Ali added that assets grew by JD 8 billion since the Fund’s establishment in 2003 to reach JD 9.6 billion, and this increase came equally from two components, JD 4 billion from the Fund’s income, and JD 4 billion from the Social Security Corporation pensioners’ subscriptions.

Al-Ali said that the comprehensive income has been edging up over the first 2 months of the year compared to same period last year,‎ registering JD 222.3 million as of February 28th , 2018, compared to JD 102.7 million as of February 28th , 2017, representing an increase of 116.5%, as demonstrated in the chart below.

She further clarified that comprehensive income consists of the income generated from the return on investment in the Fund’s various investments in money market instruments, bonds, loans, financial leases, public and private equity, real estate, and dividends, in addition to the revaluation of the Fund's strategic equity portfolio. Income from the aforementioned sources, excluding the revaluation, amounted to JD 60 million as of February 28th , 2018, compared to JD 43.3 million as of February 28th , 2017, representing a 38.6% increase from the same period last year.

Al-Ali said that the revaluation profits/losses is an accounting evaluation that is directly impacted by the performance of the Amman Stock Exchange (ASE) as the Fund's investments constitute around 11% of ASE’s market capitalization. (The Fund invests in over 50 publicly traded companies.) Thus, the Fund’s comprehensive income registers an increase when the ASE’s performance is positive and it may incur losses when Bourse’s performance declines.

Al-Ali pointed out that ASE’s performance has been positive since the beginning of 2018. Accordingly, the Fund's strategic public equity revaluation reflected the positive performance of the ASE during the first 2 months of 2018.

Furthermore, she said that there is a direct correlation between risk and return. This is very clearly demonstrated in the Fund’s performance during the period (2005-2009), where the Fund was holding the majority of its investments in the stock market, and has witnessed wild swings from income to losses.  
During the period (2005-2009), SSIF invested over 60% of its assets in stocks, and so when the stock market was over-performing, comprehensive income grew exceptionally in 2005, however, comprehensive income registered losses during the years (2006, 2008, 2009, 2011) when the stock market performance was negative.

To mitigate the impact of this high volatility in performance as a result of the high concentration in a single riskier investment like equities, the fund reduced its asset allocation in stocks from 69% of total assets in 2005 to around 24% of total assets during the first quarter of 2018, and increased its asset allocation towards safer and less volatile investments; such as treasury bonds and financial leases.

Al-Ali added that the Fund follows that best international practices in disclosure as it publishes its financial reports quarterly and its consolidated financial statements through periodic press statements and posts the annual reports on the Fund’s website: www.ssif.gov.jo. All the audited financial statements of the Investment Unit / Social Security Investment Fund since the Unit/ Fund started its operations in 2003 are published on the Fund’s website, and available to all concerned.

Asset Allocation and Overview of the Fund’s Investments  :

Al-Ali said   that the general investment policy which is approved by the Social Security Corporation’s (SSC) Board includes the strategic asset allocation for each asset class, investment tools and their targeted percentage ranges .The SSC  board supervises the Fund's compliance to the asset allocation through the monthly and quarterly reports of the Investment Board. 

Al-Ali  added that SSIF ,like other pension funds, invests in investment tools within acceptable risk levels. Therefore, the Fund builds the strategic asset allocation that takes into consideration the parameters of the national economy and revisits the asset allocation periodically in light of the actuarial studies of the SSC that take place every 3 years. 

As for the Fund’s investment in treasury bonds which currently  constitute 52% of the Fund's portfolio, Al-Ali  said that in general it is common practice for pension funds to invest in treasury bonds as they are a safe  investment tool with a fixed income stream. According to international accounting principles , Basel III , the credit risk in such investments is zero. This is also confirmed by the  Central Bank of Jordan (CBJ)  regulatory capital instructions issued on 31/10/2016 based on Basel III Standard No. (67/2016). Because of this zero risk weighting, there is strong interest by SSIF and the   banking sector to invest in treasury bonds and this is demonstrated by the strong coverage ratio of these bonds by SSIF and the banking sector.   
 As an example, the coverage ratio of the latest issue of treasury bonds  that was issued by CBJ  on April 22nd ,2018 was 302 % which reflects the extremely high demand for such safe investment tools.  

To further develop capital markets, the Ministry of Finance  has recently  issued treasury bonds of 10 and 15 years maturity dates and  the Fund participated actively in these maturities. The issuance of the long term bonds is a win – win for the country and for the subscribers including SSIF.   On one hand, these bonds help to create a benchmark for long term lending and project finance in the country and on the other hand, they carry a higher return, and have also enabled SSIF to introduce financial leasing tool as a new investment tool.  

Al-Ali spoke about the main investments that the Fund is undertaking to support national efforts aimed at enhancing  the growth of the national economy and  to create jobs. She stressed that the Fund’s investment decisions are taken based on  clear and transparent guidelines  and are based purely on investment criteria. 

SSIF Executive  Chairman also  said that Daman for Development Zones Company (DDC) “ wholly owned company “ is the Fund’s investment arm for infrastructure development, services and marketing for the King Hussein Bin Talal Development Area in Al Mafraq and the Irbid Development Area. DDC owns  80% of the capital of the Mafraq Development Corporation, which is the main developer of the King Hussein Bin Talal Development Area – Mafraq on an area of 21 square kilometers. The Company is heavily investing in various industrial sectors, logistics, transportation infrastructure and renewable energy  . 
The area has attracted 42 factories with an investment value of around JD 218 million for  the operating and under construction factories . So far,  the area attracted 4 solar projects  of a total capacity of 175 MW, the investment value  is around JD 165 million . The operating factories  in the area have created around 970 jobs, most  of them  are for local residents.

DDC also owns  100% of the capital of the North Development Corporation (NDC), which is the main developer of the Irbid Development Area on an area of 3.2 square kilometers. The area's master plan and infrastructure designs will be finalized by end of 2018. The area’s total investments value  is JD 36 million . The existing projects and those under construction will create are 1800 jobs.  
The Fund also invests directly  in energy sector through acquisitions in Jordan Electricity Company (JEPCO) and  Central Electricity Generating Company (CEGCO) and indirectly through its investment arms in Kingdom Electricity Company( KEC), Electricity Distribution Company (EDCO), Irbid District Electricity Company (IDECO) and in a number of renewable energy projects. The total value of the Fund’s investments in the traditional and renewable energy sectors amounted to JD 92 million.   
 Based on the availability of a benchmark for long term lending and project finance,  the Fund has established  in the second 2016 a wholly owned financial leasing company, called Daman for Financial Leasing. She said the Fund allocated JD400 million for the initiative. This Company is currently   financing the Madona Customs Depot for JD95 million, and the Tafileh Hospital for JD 37 million. SSIF is also  currently studying a number of projects in vital sectors including schools, transportation, health throughout the Kingdom. 
The Fund    is also a major investor in the tourism sector through its investment arm the National Company of Tourism Development (NTD) overseeing a number of owned hotels throughout the Kingdom.   
Al-Ali also pointed out that that the Fund invests in the 12 banks . The market value of the investment in the banking sector amounted to JD 1.330 billion as at the end of the first quarter of 2018 .   
Corporate Governance 
 Al Ali stated that managing the Social Security Funds is a tremendous responsibility towards all Jordanians and is being managed in accordance with good governance practices following strict and transparent procedures, as well as acceptable risk levels.
She added that there is a comprehensive set of audit structure that governs the Fund’s work processes at various levels; starting at the Social Security Corporation Board of Directors, the Investment Board at SSIF along, with an oversight of Audit Bureau, external auditors, the government and the parliament.  This is in addition to oversight on SSIF’s operations by three committees emanating from the Social Security Corporation Board of Directors, plus three committees from the Investment Board.
Key Challenges and Way Forward
Al Ali pointed out the Fund’s performance is a reflection of the  dynamics of  the environment in which operates, as it invests its assets in Jordan. She highlighted that one of the key challenges that the fund faces relates to the shortage of specialized human resources, particularly since the fund was subjected to the Civil Service back in 2012 which made it difficult to attract requisite skilled talent, given that the competing sector is the banking sector. SSIF staff currently  stand at 108.

To partly address this challenge, SSIF is currently working on entering into strategic partnerships with global funds to enable due diligence for, and implementation of large scale infrastructure projects in Jordan .

To further enhance the fund’s performance, work is also underway to hire a global consulting firm to reassess the Funds’ operations, strategic allocations, decision making process, and good governance to ensure that they are in line with best international practices.