The maharlika (freedman) were feudal warriors in Luzon, the Philippines, and the term comes from Sanskrit, meaning man of wealth, knowledge, or ability. And this is exactly what Maharlika Investment Fund, the country’s new SWF, intends to do by managing intergenerational financial assets and advancing long-term development goals. We had the pleasure of speaking to its newly appointed CEO, Rafael Consing, about the fund’s background and prospects.
[GSWF] The establishment of MIF took a while as it encountered significant resistance from the opposition and citizenry – why do you think that was?
[MIF] It is because of the unknown – in the Philippines, any new law involving wealth and government assets will typically generate political noise. We have established six different committees (Audit, Risk Oversight, Investment, Corporate Governance & Ethics, Related Party Transactions, Nomination and Remuneration) to ensure good governance. For the first five years, we will be managing the MIF as a strategic national development fund that will be multigenerational in perspective, wider in scope, and collaborative in nature.
[GSWF] MIF will be seeded with US$ 2.3 bn from Landbank, from the DBP and from the government. What is the timeline?
[MIF] Part of the capital will be received at the end of March and the balance by the end of 2024. While we have not received the cash, we already have control of it and have appointed the Bureau of the Treasury and an Inv. Committee to manage the funds in the interim.
[GSWF] MIF seems to follow recent cases of hybrid SWFs – were other governments consulted during the set-up process?
[MIF] I was not yet involved, but I understand that the Representatives from the House of Congress consulted with several other SWFs. Per my observation, if you take a look at the model, we mostly resemble Indonesia’s INA, as we also intend to raise third-party capital.
[GSWF] Do you expect to seek external capital for the fund and/or for specific projects? What would be your ideal partner?
[MIF] Yes, SWFs and other investors will be able to participate in three ways: sectoral (in the sub-funds we may create), tactical (allocating exposure to industries according to their parameters), and/or strategic (investors / operating partners looking for specific JVs).
[GSWF] What is MIF’s initial focus in terms of asset classes and industries, and what is the timeline for the first investments?
[MIF] Maharlika is not surplus based but will be a strategic or national fund that focuses on certain domestic priorities, with four goals: (i) optimal returns, (ii) poverty alleviation, (iii) economic goals, and (iv) sustainable development. We have no intention of competing with banks so will avoid traditional senior loans and will provide mezzanine or equity capital. Our focus in terms of sectors will include:
1.Infrastructure, including physical, digital, and social infrastructure:
a.Physical infrastructure, including 197 projects approved by the Philippines’ NEDA. 122 of them are related to connectivity (airports, ports, roads, etc.) and 44 of them are offered as PPPs, in which we may decide to participate. The PPP Law was recently implemented, and we expect MIF to enable such processes by providing staple capital and acting as co-grantor.
b.Digital infrastructure, by building telecom towers and providing solutions to (i) agriculture, connecting farmers and giving them access to information and data; (ii) education, extending formation to rural areas; (iii) healthcare, allowing doctors to cover and reach wider population; and (iv) entrepreneurship, giving rural entrepreneurs access to a wider market.
c.Social infrastructure, building a large number of climate change ready classrooms that can be converted to shelters if needed.
2.Energy Security, tackling the elevated cost of electricity in the country and contributing to a larger share of renewable energy.
3.Tourism, which will increase in the next few years, partly thanks to our work on the connectivity projects (optimizing touch-points).
4.Agroforestry industrial urbanism, working with the government to identify spare lands and putting them to work.
5.Aerospace and aviation, contributing to the several PPP of international airports projects across the Philippines.
[GSWF] How will ESG matters be incorporated into the investment decision process?
[MIF] Central to managing MIF is proper governance of both the enterprise and the investment process. That requires consciously understanding the social and environmental impact of the projects which we undertake, the sense of discipline and responsibility that characterize our corporate behavior, and the transparency in the conduct of our business. Social impact and good governance are embedded in the law that created the MIF. We will apply rigor consistently across the origination, investment and monitoring process.
[GSWF] You are officially employee #1 of Maharlika. How big do you expect it to be in terms of headcount?
[MIF] Once the GOCC commission approves the positions, we will start building the starting team, which will most likely consist of 30 people, including fund managers, infrastructure experts, lawyers, auditors, IT, etc. There is a plethora of talent in the Philippines, and we are looking at both domestic and international candidates.
