Heritage and Stabilization Fund (HSF)

What Is the Heritage and Stabilization Fund (HSF)?

The Heritage and Stabilization Fund is a sovereign wealth fund that was laid out in March 2007 by the government of the Republic of Trinidad and Tobago. It was recently known as the Interim Revenue Stabilization Fund, which was set up in 2000. The primary objectives of the fund are to save and invest surplus petroleum production revenues to support and support public expenditures during periods of revenue downturn and to give a heritage to people in the future of the nation.

Understanding the Heritage and Stabilization Fund (HSF)

The Heritage and Stabilization Fund is denominated in U.S. dollars and its fiscal year closes in September. The fund gives a cushion to the economy of the islands in times when the price of oil or natural gas has fallen. Toward the finish of 2019, the fund had net assets of $6.3 billion, compared with a value of $1.4 billion of every 2007.

Rules of the Fund

As per its overseeing legislation, the fund is planned to "(a) Cushion the impact on or support public expenditure capacity during periods of revenue downturn whether brought about by a fall in prices of crude oil or natural gas; (b) Generate an alternate stream of income to support public expenditure capacity because of revenue downturn brought about by the depletion of non-restoration petroleum assets; and (c) Provide a heritage for people in the future of residents of Trinidad and Tobago from savings and investment income derived from the excess petroleum revenues."

Following a sharp drop in energy prices in 2015, the fund reported that it pulled out roughly $375 million to add to its annual budget. This was the principal such net withdrawal since the fund's commencement. In its 2016 annual report, the fund stated that is cumulative [annualized return](/annualized-all out return) since commencement was 5.34%, beating the benchmark of 4.87%.

Under the legislation that laid out the fund, withdrawals are "restricted to 60% of the amount of the shortfall of petroleum revenues for the significant year; or 25% penny of the balance of the Fund toward the beginning of that year, whichever is the lesser amount. The Act blocks any withdrawal where the balance standing to the credit of the Fund would fall below one billion US dollars assuming such withdrawal were to be made."

Withdrawals are permitted "Where the petroleum revenues collected in any financial year fall below the estimated petroleum revenues for that financial year by something like 10%, withdrawals might be produced using the Fund."