The Compact of Free Association Trust Fund Board of Trustees is tasked with the oversight and management of the Compact of Free Association Trust Fund, which was established in 1994 when the Compact agreement between the Republic of Palau and the United States came into effect. Under the Compact, seventy million U.S. dollars was appropriated towards establishing a Trust Fundto support Palau’s national budget asthe nation progresses towards economic independence and self-sufficiency.
Initial capital contributions from the U.S. government amounting to sixty-six million U.S. dollars established the Trust Fund in 1994, and the remaining four million U.S. dollars was contributed in 1998 making up the total of the seventy million U.S. dollars appropriated. Since its inception, the Palau COFA Trust Fund has grown considerably with no additional capital contributions as a result of its investment gains. Performance reports will be made available on this site showing the growth of the Palau COFA Trust Fund since inception.
Shortly after establishment of the COFA Trust Fund (‘Fund’) in 1994, a Board of Trustees was created to oversee the Fundand monitor its investment. Responsibility for the oversight and management of the Trust Fund was entrusted to a Board of Trustees until 2007 when the Board was dissolved through passage of legislation. The Fund was then monitored and managed by a Trust Fund Committee in collaboration with the Ministry of Finance. RPPL 9-20, signed into law in January 2014, re-established the COFA Trust Fund Board of Trustees and once again fiduciary responsibility fell upon the Board to manage the COFA Trust Fund assets and monitor its’ investments.
The Board of Trustees has historically relied on the expertise and advice of an Investment Consultant, with whom there is a shared fiduciary responsibility, to ensure the prudent management and investment of the Trust Fund.
Trust Fund assets are maintained and kept secure by a fund Custodian, a service provider formerly separate from the Investment Consultant until 2008 when these services were provided by a single U.S. firm. To illustrate, at inception, Merrill Lynch and First Hawaiian Bank, both U.S. financial institutions, were our Trust Fund Consultants and Custodian, respectively. Custodianship changed to Bank of Hawaii during Merrill Lynch’s tenure as Consultant until 2008, when, through a formal RFP (Request for Proposal) process, Morgan Stanley, another large U.S. firm, was selected as both Consultant and Custodian of the COFA Trust Fund assets. Following re-establishment of the COFA Trust Fund Board of Trustees in 2014, Morgan Stanley announced that it was pulling out of this region, and in 2015, the Board selected Raymond James & Associates, a U.S. firm, once again through a formal RFP process, to serve as both Consultant and Custodian of the Fund’s assets.