Panama
Incorporation and purpose
The Fondo de Ahorro de Panamá (“FAP” or “Fund”) was created by Panama’s National Assembly through Law 38 of June 5, 2012 (“Law 38”). The purpose and objective of the FAP is: to establish a long-term savings mechanism for the State and establish a mechanism for stabilisation in the event of a state of emergency and economic slowdown.
Source of funds
Under Law 38, FAP’s source of funds are to be comprised of:
- Contributions from the Panama Canal Authority to the National Treasury, above 3.5% of nominal GDP for that fiscal year;
- The proceeds from the sale of the shares of state-owned enterprises;
- Any inheritance, legacy, and donation that are made to the FAP;
- Any resources, that by Law, are destined to go to the FAP.
Governance arrangements
FAP’s assets (investments) are held in a trust, in which the Ministry was to be the Settlor, as a representative of the State, which holds title to FAP assets. The Banco Nacional de Panamá serves as the Trustee.
Law 38 provides that the FAP is to have a Board of Directors, which is the management organ for its assets (the trust), and whose objective shall be to define a policy for FAP investments. The Board comprises seven directors, who are named by the executive branch of the government, are subject to ratification by the National Assembly, and serve seven-year terms. The Board’s functions include oversight of the strategic placement of FAP assets.
FAP also has a Supervisory Commission, as “an organ representative of civil society,” which meets annually to evaluate the annual report prepared by the Board of Directors. The Supervisory Board is obligated to issue an annual opinion report with respect to the administration of the FAP.
Finally, FAP has a Secretariat, whose members are named by the Board of Directors, and which is responsible for technical support to the Board of Directors and carrying on the executive and administrative work of FAP.
Reporting and auditing
FAP financial statements are audited and published on a quarterly and annual basis. The Board of Directors publishes an annual report and the Fund also publishes unaudited quarterly reports. The Supervisory Commission issues an annual report, which is submitted to the Ministry for publication. All information from the Fund is available on its website: www.fondoahorropanama.com
Investment objectives and risk management
FAP structures its Investment Plan that defines the Strategic Asset Allocation for the Fund's Strategic Portfolio, in accordance with the guidelines established in the FAP Law, its Regulations, Investment Directives, Investment Policies, and the Santiago Principles.
Under the Fund's capital preservation mandate (Investment Objective), the technical design of considering various quantitative criteria are to maximise the expected return of the Fund on the investment horizon and minimising its risk by efficiently diversifying the portfolio. These considerations and criteria are:
- Preservation of the capital of the Fund;
- A long-term investment horizon based on a projection of five years;
- The estimated average loss of the portfolio is expected to not exceed 5% per annum, using a 95% confidence CVar;
- Liquidity requirement is minimal for the next five years.
