Home / News / NZ Super doubles down in local private markets

NZ Super doubles down in local private markets

News

Shortly after David Neal was appointed as the inaugural CIO of the Future Fund, the guardians approved the appointment of global custodian Northern Trust as its asset servicing partner. No big deal, you’d think. Well, welcome to the world of high-profile public sector investing.

After the announcement, in May 2007, Sydney’s ‘Daily Telegraph’ tabloid led the newspaper with the story under the heading: ‘Our future in their hands’. In the more-polite world of the finance media, it goes down as arguably the biggest, or best, beat up of all time.

Neal had seen the headline as he arrived from his ferry trip into the city from Manly, where he lived at the time, and wondered what the story was about. After a quick read, he later recalled thinking: “What are they going to say when we start appointing the managers?”

  • Like it or not, public sector funds get a lot of attention from politicians, trade unions – which railed against the Northern Trust appointment – and various special interest groups. The Future Fund management and guardians can take heart that they don’t have to publicly report on a monthly basis, as their New Zealand counterpart, NZ Super, does.

    In fact, one of the many similarities between the Future Fund, formed in 2006, and NZ Super, formed in 2001, is that the inaugural chief executive of both funds was the late Paul Costello. He had also presided over Northern Trust’s appointment in New Zealand. The company is still the asset servicing provider for both funds, so it must be doing something right.

    The point to this footnote to the history of big fiduciary funds, especially sovereign wealth funds which often have their own acts of parliament, is that they also often have politically drawn requirements and constraints on where and how they can invest. For the Future Fund, for instance, the fund can invest anywhere it wants within its target risk parameters. However, it is not allowed to insource the day-to-day management of that money; it has to appoint external managers for all its investments.

    NZ Super’s main specific directive, apart from the annoyance of having monthly performance reports made public and therefore scrutinised by all and sundry looking to gain a cheap headline, is that the fund is required to invest some of its assets in New Zealand, by “considering opportunities to increase the allocation to New Zealand assets”.

    This requirement was introduced in 2009, although the fund had been investing directly in New Zealand companies back to 2005. No set level of investment is indicated but following a review, the fund saw additional NZ opportunities outside the listed markets.

    Last week (February 3), NZ Super announced it had committed up to NZ$100 million (A$94.4 million) to another local private markets fund, which would take its total NZ assets to about NZ$7 billion, out of the whole fund’s assets of NZ$53 billion.

    The fund will be a cornerstone investor in the fourth fund managed by Auckland-based Pioneer Capital, which is expected to close the latest fund with six-eight investors and NZ$260-280 million. NZ Super had already invested in the manager’s second and third funds. It targets NZ companies seeking international growth.

    Del Hart, NZ Super’s head of external investments and partnerships, said high growth, mid-market companies were an important part of the fund’s diversified investment approach, which aimed to maximise returns without undue risk to the overall fund. 

    “We look forward to seeing this money put to work by innovative New Zealand businesses with the ambition and capability to succeed offshore,” he said.

    Domestically, NZ Super has been investing in this sector since 2005, with previous investments generally delivering strong net returns above its passive ‘reference portfolio’ benchmark.

    Greg Bright

    Greg has worked in financial services-related media for more than 30 years. He has launched dozens of financial titles, including Super Review, Top1000Funds.com and Investor Strategy News, of which he is the former editor.




    Print Article

    Related
    Perpetual hands front office to State Street’s Charles River

    Perpetual will use Charles River Development’s Investment Management Solution for its front-office operations as it prepares for an “evolving investment management landscape”.

    Lachlan Maddock | 27th Mar 2024 | More
    How Trump’s (potential) second innings could kickstart inflation

    A second Trump presidency would see a new era of American economic protectionism, according to Allspring, sending inflation higher and global growth lower. And that’s without factoring in potential threats from China and Iran.

    Staff Writer | 27th Mar 2024 | More
    Why there’s more to all-time highs than just hype

    It’s not just FOMO. Truly innovative business models are helping push stocks higher, says Capital Group, and for some of them there’s a lot more growth to come.

    Lachlan Maddock | 27th Mar 2024 | More
    Popular