Early payout from Philippines’ Maharlika Investment Fund raises eyebrows over its true nature

[MANILA] The Philippines’ Maharlika Investment Fund, barely three years after its creation, has handed the government an early fiscal win with a higher-than-expected dividend payout.

But the transfer exposes a bigger question: is the country’s first sovereign investment vehicle meant to be a long-term capital accumulator, a development fund or a stopgap source of fiscal support?

That question is at the centre of the debate since Maharlika Investment Corp announced two weeks ago that it would remit nearly 1.4 billion pesos (US$22.5 million) in dividends to the Bureau of Treasury to fund the government’s needs during the energy pressures arising from the US-Iran war.

The payout is above the 50 per cent minimum required of government-controlled entities and represents 75 per cent of its 2025 distributable net earnings of 1.8 billion pesos, said Maharlika.

The board’s decision to channel the proceeds into an urgent response to the national energy crisis has clouded the positive signal from the payout itself, especially given earlier criticism on whether the fund could generate any returns at all.

Blurred mandate

Maharlika president and CEO Rafael Consing Jr has long maintained that the fund would start off as a national development fund in the first five to seven years. “Once we generate excess funds, then we can go to the markets,” he said.

Critics now argue that Maharlika needs a clearer mandate.

“While (Maharlika) will invest in financial instruments in a bid to earn commercial returns, it will also invest huge portions of its funds in local development projects in a bid to earn economic returns,” said a group of 21 faculty members from the University of the Philippines’ School of Economics, including former socio-economic planning secretary Ernesto Pernia.

“This is also called the ‘double bottom-line objective’,” they added in their statement.

They said aiming for both financial and economic returns is far more complicated than aiming for just financial returns as the latter is easier to measure while returns on development projects – though at times may be potentially higher – are “softer, more amorphous, harder to measure and sometimes even non-monetary in nature (for example, projects with distinct positive or negative externalities).”

Yet, for Eric Jurado, hedge fund manager at ECJ Capital Investment Fund, the answer is not necessarily either-or. “Many successful sovereign wealth funds around the world serve both financial and strategic objectives,” Jurado told The Business Times.

The question is whether objectives are pursued in a way that “still protects the fund’s long-term financial sustainability and independence”, he said.

The early dividend transfer suggests that, for now, Maharlika’s role is broader than a conventional wealth fund’s.

Maharlika independent director Stephen Cuunjieng said the fund is operating in a space that is more patient than public markets.

“We’re akin to something in between a strategic investor, an infrastructure investor and private equity (PE),” he said. “It’s not completely permanent capital, but it’s more than the five to seven-year patient capital of PE firms.”

Regional mismatch

When juxtaposed against more established Asean counterparts, Maharlika’s fiscal role looks structurally different.

Singapore’s GIC was created to manage the country’s foreign reserves, while Temasek Holdings was established to hold and commercially manage companies and assets previously held by the Singapore government.

Malaysia’s Khazanah Nasional, meanwhile, was set up as a sovereign wealth and strategic investment fund owned by the Minister of Finance (Incorporated).

That gives these institutions – with longer operating histories – a deeper asset base.

On the other hand, Maharlika is a non-surplus fund with an asset base of 129 billion pesos. Its capital was built mainly from government financial institutions (GFIs) and national government funding. 

This distinction matters. The fund is not only being asked to produce returns but also to define what a sovereign investor should be in a country still trying to build scale.

The state interest loop

Data from Maharlika show how much of the fund remains caught in a circular capital loop. 

Of the fund’s business income of 2.8 billion pesos in 2025, a staggering 2.7 billion pesos, or 95.7 per cent, was derived from passive interest earned on placements that were parked with GFIs.

Maharlika drew much of its seed funding from Land Bank of the Philippines and the Development Bank of the Philippines, parked a large share of assets in liquid government-linked instruments, and is now returning part of the income earned on those placements to the Treasury as dividends.

Put simply, Maharlika is still largely managing state cash rather than deploying capital.

In December 2022, critics had already flagged this “round tripping” of funds from GFIs and investing them back into government securities. They said the diversion is in “no way a creation of wealth”.

Compounding this issue is how 50 billion pesos of Maharlika’s mandated initial capitalisation remains unremitted by the state, sitting idle on the balance sheet as a line item labelled “due from the national government”.

Meanwhile, nearly 53 per cent of Maharlika’s active asset base of 129 billion pesos remains in cash and liquid cash equivalents.

Breaking the cash logjam

Yet, to dismiss Maharlika as a stagnant cache of public liquidity overlooks an inflection point in its portfolio.

Over the past year, the fund has begun converting more of that cash into active investments. Financial assets held at fair value through other comprehensive income rose from 174.6 million pesos in 2024 to nearly 4.8 billion pesos in 2025, before more than doubling again to 10.3 billion pesos in the first quarter of 2026.

In an overview report on Maharlika dated Jun 25, following the fund’s release of its Q1 2026 scorecard, Global SWF pointed out that while the fund is still earning mainly from cash, the investment book is “no longer static”.

But rather than seeking diversification in international capital markets, which is a template strategy of global wealth funds, Maharlika is anchoring active capital inside the domestic grid. 

“The fund’s first phase was capital preservation and institution-building, but its next phase is now taking shape around ports, grid infrastructure, mining, off-grid power and fuel security, which is in line with its position as a strategic sovereign fund,” said Global SWF.

In its initial flagship transaction, Maharlika deployed capital into Synergy Grid and Development Philippines, which holds a key stake in the National Grid Corporation of the Philippines, the country’s sole transmission operator.

The fund also acquired a domestic foothold through an investment in port operator Asian Terminals and extended targeted financing through a bridge loan to Makilala Mining.

Another example is Maharlika’s short-term revolving credit facility of up to 15 billion pesos with Petron Corp, the Philippines’ only remaining oil refiner.

The fund is also moving into power transmission, with its Mindoro province grid upgrade agreement and Saudi Arabia’s ACWA Power landmark memorandum of understanding on renewables and storage for off-grid islands.

This deployment mix suggests a fund still building its identity – one deal at a time.

“Maharlika as an emerging sovereign investment institution sits somewhere between a purely financial sovereign wealth fund and a strategic development fund,” Jurado said. 

“How that balance evolves over the next several years will be one of the most important factors in determining its long-term success.”