What Fund Managers Want To Know Before Investing In Palau

By Jackson M. Henry —- 

Investors who constantly assess Palau’s investment viability come in variety. They include wealthy individuals, business partners and even multi-national corporations. But there is a special class of professionals who not only have the power to move markets but, also control an arsenal of funds that can change the economic course of a nation. They are Fund Managers or sometimes referred to as Investment Brokers who work for equity capital firms. One of the greatest fund managers is none other than investment guru, Warren Buffet, who started with $100 in 1957 and today is the 2nd wealthiest man in the USA and 3rd worldwide, according to Bloomberg Billionaire Index.

Fund managers are well trained and specialized in making money with money. They move funds pooled collectively from many individuals or firms into stocks or industries like telecom, hospitality, real estate and utilities, etc. Many fund managers have billions under their management and can invest some of them in Palau, if our deals are “sweet”. 

In my 27 years dabbling in the field of banking and real estate, I have dealt with a few seasoned fund managers. The first one was from Alden Capital based in Colorado. I introduced him in 1994 to the Governor of Pohnpei who was in the market for funds to finance the circumference road around the island. In revealing just how much power he wields, the fund manager told me, “if the financial fundamentals are right, we can turn Pohnpei into another Maui”. I also brokered another deal in the late 1990s with then Governor Skebong to build a hydro power plant in Ngaremlengui. However, the law that prohibited states from borrowing prevented that deal from pushing through. 

One of the larger real estate deals that I closed in Palau was also done through a fund manager who worked for a Europe based equity capital firm. So if a deal looks “rosy”, you can bet that it will attract fund managers like honey bees to flowers. 

To inject funds into deals in Palau, there are certain issues that fund managers want to know upfront. First is: are the financial fundamentals solid in Palau. These involve profitability and safety of their investment. Second, they want to know how other investors are faring off and how they are reated while doing business in Palau. As one investor once challenged me, “show me an investor who has made a killing in your country and I will invest”. That is why brokering investors to Palau is always a challenging proposition. 

Third and the most important issue is predictable overall growth of Palau’s economy. Because there are challenging circumstances in developing nations and emerging markets like Palau, fund managers need them identified and assessed before injecting capital. So fund managers want to know how they can drive both “top-and-bottom-line growth” quantitatively, from year-to-year. Without revenue growth, they risk flat or negative investment returns. 

Other issue is the competition. Fund managers often cite their success in emerging markets where capital is both scarce and short term. This is where Palau has a competitive edge because large capital is hard to find here. Unlike mature capital markets in Singapore and Hong Kong, Palau is considered a “frontier” and “off the radar” market. 

Finally, fund managers want to be sure that economic data provided are both correct and verifiable. One cannot do an intelligent analysis if the data are either non-existent or “flimsy”. 

In short, the overriding fundament that fund mangers want to know in Palau is our growth factor. Yes, tourism figures are impressive but, the question now is: is it sustainable in view of our crumbling infrastructures and scarce skilled labor pool. 

Fund managers look at the long term prospect when investing. So Palau’s future growth and government’s commitment to addressing our infrastructures and providing a positive and dynamic business environment will attract or dissuade new capital from our shores. As Jeffrey Thurmond once said, every fund manager wants that “gold rush” feeling when injecting capital in an emerging market like Palau.

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