The next investment scandal may have just passed us without our noticing it. Like most in Gloria Macapagal-Arroyo’s administration, they strike like thieves in the night.

This controversy has victimized much too stealthily, hidden by the ruckus of insidious boardroom rabble; slithering first, sneaking up and then suddenly pouncing. We didn’t notice because we were otherwise preoccupied with the complexity of hostile corporate raids. Or maybe we aren’t affected, neither being rank and file nor lowly paid government employees and public-school teachers—constituencies of pension funds from where these spawn.

Pensions are investment vehicles built from passive contributions that earn through prudent outlays eventually paid back as annuities. For many, these constitute rainy-day savings.

Being such, we commiserate with the thousands of teachers and the millions more government employees who lost over P12 billion when their investments in a listed electricity distribution company lost its value.

From the time their pension manager decided on a crusade, to its lowest point when spooked foreign investors figuratively took the first plane out, values slid by over P4.6 billion by one count and multiples of that by others.

The BusinessMirror’s section editor Emeterio Sd. Perez estimated one pension’s paper losses at over P4.607 billion from a P20.554-billion value a month ago to P15.945 billion just last Monday. A monthly loss of 22.42 percent, annualize that, and we might have the basis for economic sabotage.

For the state pension fund for the private sector, likewise, heavily invested in the same utility, Perez estimated investment-value depletion at P1.138 billion. Adding those from other government agencies—one, the government depository, another, a preneed agency, and still another, a housing-development fund—Perez estimates additional losses of P6.712 billion.

While paper losses are not realized until transacted, even finance sophomores know that the market capitalization of an investment is critical in the trust-fund industry.

Because pension liabilities often increase unexpectedly, offsetting asset accounts cannot just suddenly degenerate. When liquid assets other than cash dissipate as equity investment values fall, liquidity becomes critical when pension payouts come due. A pension can either monetize its equity investments and kick in realized losses or draw from its cash account. Both ways, the drain of paper-losses will readily be felt.

Pensioners are not your garden-variety investors. Their divestments are compelled not by choice but by circumstance. Drawdowns and liquidations occur all too frequently—sudden when related to loans, emergency, death and calamity benefits and programmed when based on retirement actuarials.

On a pension fund’s balance sheet, after cash and deposits, investments in stocks and marketable securities are the most liquid. Market capitalization, computed by multiplying the market value of a security by the number of shares, is critical to a pension. In its case the investment value is the market price multiplied by the number of shares held.

Where the market capitalization of a major investment, such as those in a listed utility, decomposes by P12.5 billion, whether paper losses or realized, these exert tremendous pressures on liquidity because of the constancy of payouts. The cash account must compensate if it can. Given pensioners are lowly paid employees, claims are frequent. By impairing liquid assets, pensioner’s nonprogrammed claims can be delayed further, emergency and calamity loans reduced and even actuarials compromised.

Moreover, when stocks secure debts as these fall in value, effective costs of capital rise exponentially and impact negatively on pensioner benefits.

Both the integrity of a pension and its longevity are functions of contributions, liquidity and investment value. Impairing one seriously endangers others.

Remember that these are the funds of the lowest-paid in Arroyo’s economy. Add up the losses inflicted, try to comprehend the magnitude of a P12.459-billion depletion and then try not to scream bloody murder.

Update to include the hysterics, yelling and yelping during and after last week’s corporate power plays and the totals breach the statutory parameters for plunder.

To be fair, losses should be seen against gains albeit the latter might be nonrecurring never-again events.

Last year, anyone invested on the market index alone would have earned. With one-time divestments, one pension realized P153.4 million in revenues. These nonrecurring divestments accounted for over 12 percent of total. Consolidated revenues were P86.34 billion with insurance revenues at P48.20 billion. Its claims and benefits payouts totaled P32.79 billion.

Specifically, P10.4 billion gains from the stocks sales from three blue-chip companies accounted for most of its liquidity. The largest were from a single divestment which sale accounted for P5.7 billion. Unfortunately, one month’s actions costing P4.06 billion nearly negates its largest gains.

P12.5 billion in accounting losses depletes the value of pensions because these are rated according to the current values of its investments, not purchase prices or prospective open-ended values. Because one month’s 22.42-percent depletion resulted from controversies compared with gains from nonrecurring divestments, fiduciary irresponsibility is not limited to when funds are invested.

Fiduciary irresponsibility includes the imprudent use of these funds. A political vendetta, should that underlie investment strategy, hardly qualifies as a prudent application.

Trust is critical where pensions are concerned. More where these are controlled by political appointees, because not only are pensioners vulnerable and passive investors, they are also helpless. It is not easy to take pension managers to court and sue them for impropriety, imprudence or fraud. More so when dotted lines lead from fiduciary officers to impeachable executives with a patented prepaid, get-out-of-jail pass.

To appreciate the magnitude of this issue, let us use references we’ve become familiar with. At National Power Corp.’s high generation costs of P6.70/kilowatt-hour (kWh), a P12.5-billion loss is 1.86 billion kWh. Where rice is priced at P30/kilo, a P12.5-billion loss is 415.30 million kilos. Where a national broadband bribe is $200 million, a P12.5-billion loss is equivalent to 63 broadband deals. With those larger numbers, this fiasco suddenly seems worth every peso lost.

Better to light a candle than to curse the darkness, so it’s said.

That maxim applies especially to the poor, who must not only live by their wits but also cope with unaffordable power rates. A better option for them, however, is to discard candles for lighting and firewood for cooking and tap electricity instead. That’s the basic rationale for the government proposal to set aside a P2-billion subsidy for their electricity use.

A lot of us have been faced with a situation where the circumstance calls for an answer on whether or not to be a partner, a creditor or merely an investor of a particular project or business.

The next investment scandal may have just passed us without our noticing it. Like most in Gloria Macapagal-Arroyo’s administration, they strike like thieves in the night.

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