Overview:
Palau’s COFA Trust Fund reached $437.9 million as of Sept. 30, 2025, according to the latest report from the COFA Trust Fund Board. The Board is advising the nation to “stay the course” as global markets remain uncertain, noting steady long-term growth even as quarterly returns lag behind benchmark expectations. The update provides key insights for policymakers as Palau prepares for future financial obligations.
By: L.N. Reklai
KOROR, Palau — The COFA Trust Fund reached a market value of $437,898,084 as of Sept. 30, 2025, according to the latest quarterly report submitted by the COFA Trust Fund Board of Trustees. Board Chair Lindsay M. Tunarong said the report was delayed slightly to ensure accuracy, but emphasized that Palau should “stay the course” with its long-term investment strategy, even as global markets remain uncertain.
Lindsay Timarong, Chairperson of Palau’s COFA Trust Fund Board of Trustees (Source: OEK YouTube 2023)
The Trust Fund supports Palau’s financial stability after Compact grants end, making its performance a key concern for policymakers preparing the national budget and long-term development plans.
Steady Growth but Behind the Benchmark
The fund earned a 3.50% return in the third quarter of 2025 and 8.10% over the past year, continuing long-term stability with a 7.95% return since inception in 1994. But returns were lower than the fund’s policy benchmark, which returned 5.91% for the quarter and 11.97% over the year.
The biggest factor was investment selection — essentially, how individual investment managers performed — which detracted 3.01% from quarterly performance.
Where the Fund Is Invested
The CTF remains broadly in line with its target investment mix:
- U.S. equities: 40.33%
- Fixed income: 19.80%
- Global climate investments: 15.53%
- Non-U.S. equities: 13.07%
- Alternative investments: 11.27%
For ordinary citizens, this means Palau’s money is spread across different types of investments to reduce risk — similar to diversifying crops so a bad season for one doesn’t ruin the entire harvest.
General Fund Reserves at $6.04 Million
The General Fund Reserve Fund, which supports short-term government needs, was valued at $6,042,219 at the end of the quarter. It posted a 3.34% return for Q3 and 4.79% over the past year, also trailing its benchmark.
Its investments are simple:
- U.S. equities: 59.62%
- U.S. fixed income: 40.38%
Global Economic Outlook: Expect More Market Swings
The fund’s investment advisor, Raymond James & Associates, projects continued global uncertainty over the next 12 months but expects moderate economic improvement in 2026. Highlights include:
- U.S. GDP growth: +2.0% in 2026
- Interest rates: Two more Fed rate cuts expected in 2025
- Stock market: S&P 500 projected to reach 6,900, though near-term “consolidation” is expected
- Oil prices: Expected to stay between $60–$65 per barrel due to oversupply
- Volatility: Likely to remain high due to inflation and geopolitical tensions
For Palau, this means the Trust Fund will continue facing ups and downs, and policymakers should prepare for market swings when planning budgets and long-term commitments.
Why This Matters for Palau
The COFA Trust Fund’s stability is crucial for the nation’s financial independence as Compact grants decline. The Board’s message to “stay the course” reinforces the need for long-term thinking — not reacting too quickly to short-term market changes.
For policymakers, the report’s key points include:
- The fund is growing but not meeting benchmark performance.
- Diversification remains strong and within target ranges.
- Global markets will remain volatile through 2026.
- Careful budgeting is essential as Palau prepares for future reductions in external support.
The full report submitted under RPPL 9-20 includes detailed market commentary and the complete investment analysis for both the CTF and GFRF.
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