Fifa adopts a riskier financial strategy

0

FIFA, the governing body of world football, has changed its own asset management statutes to invest in stocks.

The changes were made by the football body at a FIFA Council meeting last October and detailed in its Annual Report. Previously, Fifa only invested in money market instruments or government and corporate bonds, but it can now invest up to five percent of its total investment portfolio in stocks.

The changes to the FIFA Financial Asset Management Regulations were not mentioned in a Press release following the October 26 meeting but are clearly indicated in the last annual report.

As of December 31, the fair value of Fifa’s portfolio was estimated at $ 3.621 billion, which means the organization could invest up to $ 180 million in publicly traded stocks. The report notes that the policy change will be implemented over several months to “mitigate the risk of timing”.

Stocks are generally viewed as riskier and higher paying investments because, unlike debt, there is no obligation to repay the invested capital.

Fifa’s overriding investment objective is to preserve “the real value of Fifa’s financial assets,” according to the report, which did not provide an explanation for the change in asset management guidelines. However, Fifa only allows investments in what it describes as “very strong counterparties,” so despite the legislation having the ability to take a riskier approach, all secure stocks are expected to meet certain thresholds.

In 2018, Fifa maintained a minimum A1 credit score for investments under one year and an average AA credit score for those over 12 months. At the end of last year, FIFA’s return on investment stood at 2.47% (valuation held to maturity).

This approach has allowed Fifa’s portfolio to “perform well” against its targets in what the report describes as a “difficult” investment climate with “volatile” markets.

According to the report, Fifa managed the duration of the investment portfolio in a “conservative” manner and was able to “minimize the negative impact” of the rise in interest rates in the United States and even offset it by using currency markets in conjunction with fixed-rate investment. Fifa’s portfolio was able to generate a positive risk-adjusted return of 1.95% above the benchmark on a market valuation basis.

FIFA, the governing body of world football, has changed its own asset management statutes to invest in stocks.

The changes were made by the football body at a FIFA Council meeting last October and detailed in its annual report. Previously, Fifa only invested in money market instruments or government and corporate bonds, but it can now invest a maximum of five percent of its total investment portfolio in stocks.

The changes to FIFA’s financial asset management regulations were not mentioned in a press release following the October 26 meeting, but are clearly spelled out in the latest annual report.

As of December 31, the fair value of Fifa’s portfolio was estimated at $ 3.621 billion, which means the organization could invest up to $ 180 million in publicly traded stocks. The report notes that the policy change will be implemented over several months to “mitigate the risk of timing”.

Stocks are generally viewed as riskier and higher paying investments because, unlike debt, there is no obligation to repay the invested capital.

Fifa’s overriding investment objective is to preserve “the real value of Fifa’s financial assets,” according to the report, which did not provide an explanation for the change in asset management guidelines. However, Fifa only allows investments in what it describes as “very strong counterparties,” so despite the legislation having the ability to take a riskier approach, all secure stocks are expected to meet certain thresholds.

In 2018, Fifa maintained a minimum A1 credit score for investments under one year and an average AA credit score for those over 12 months. At the end of last year, FIFA’s return on investment stood at 2.47% (valuation held to maturity).

This approach has allowed Fifa’s portfolio to “perform well” against its targets in what the report describes as a “difficult” investment climate with “volatile” markets.

According to the report, Fifa managed the duration of the investment portfolio in a “conservative” manner and was able to “minimize the negative impact” of the rise in interest rates in the United States and even offset it by using currency markets in conjunction with fixed-rate investment. Fifa’s portfolio was able to generate a positive risk-adjusted return of 1.95% above the benchmark on a market valuation basis.


Source link

Share.

Comments are closed.