Despite being a growing reservoir of funds under management, this critically important pool of capital is confronting mounting problems collating and disseminating key data in a timely manner.
The ratings house is pinning its growth strategy on a revamped methodology that increases the emphasis on governance to 25 per cent – a timely move considering APRA’s proposed reforms.
NZ fund’s $270m outsourcing deal wrapped for Xmas
The New Plymouth Council (NPC) has found a home for approximately NZ$270 million (A$255 million) previously controlled in-house by subsidiary Taranaki Investment Management. Australian contenders are Cambridge, which is the front runner, Mercer and Russell Investments.
In a decision confirmed at a Council meeting last week, the TIML mandate was awarded to one of them, but remains a mystery to the broader investment community as of late last week.
NPC agenda notes for the December 13 meeting show negotiations with the preferred ‘fully outsourced agent’ (FOA) to run the TIML money should be completed by this Friday.
Under the new structure agreed by NPC in September following a review by Auckland-based consultant Cameron Partners, TIML will be replaced by the recently-formed Perpetual Investment Fund (PIF) Guardians.
The NPC also hired Melville Jessup Weaver (MJW) “on a short term contract” to draft new investment policies and strategic asset allocation (SAA) models for the PIF Guardians as well as to help with “the appointment of the [FOA]”.
According to the NPC meeting agenda notes, the MJW SAA cuts exposure to both Australasian shares and NZ property to zero from the current respective allocations of 10 per cent and 20 per cent. Under the MJW model, global equities jumps from 20 per cent to 38.5 per cent of the portfolio while emerging markets shares drop slightly from 10 per cent to 6.5 per cent.
MJW has reduced the current 30 per cent SAA private equity target to 17.5 per cent with a new ‘alternatives’ exposure receiving the same weight. The MJW SAA also lifts the PIF fixed income exposure from the current 5 per cent to 15 per cent.
“Despite a lower allocation to growth assets, the expected return and risk modelling undertaken by MJW suggests a slightly higher return and lower risk profile from the proposed portfolio,” the NPC agenda says.
Previously, Taranaki strayed way off its SAA with almost 70 per cent of the fund’s assets tied up in a Tasmanian dairy farm operation until late last year.
In 2015 the NPC pushed Taranaki to sell down the controversial Tasman Farms. Following a fraught sales process, that included legal action after Taranaki accepted an offer from a Chinese firm while rebuffing a previous bid by an Australian company, Tasman Farms returned net proceeds of about $195 million, representing a margin of close to $90 million on purchase costs.
The latest NPC accounts show about $200 million of the PIF currently sits in cash.
According to the accounts, for the year ending June 30, 2016, remuneration for “key management personnel” – comprising chief executive, Michael Trousselot, and the Taranaki board – jumped to more than $1.2 million for about $750,000 in the previous annual period.
“The increase in remuneration relates to performance incentives paid in relation to the sale of Tasmanian Land Company assets,” the NPC document notes.
Taranaki is due to formally hand over control to the PIF Guardians in March next year when implementation of the new outsourced model should be complete.
“As a result the Company is expecting to incur redundancy and other employment costs of $145,425 which has not been provided for in the financial statements,” the Taranaki report says.
– David Chaplin, Investment News New Zealand
