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.
Sovereign funds get behind long-term index
Adrian Orr
A group of six big sovereign wealth funds and pension funds, including the New Zealand Superannuation Fund (NZS), has backed the launch of a long-term investment index, announced last week at the World Economic Forum in Davos.
In a statement, Adrian Orr, NZS chief executive, said his NZ$30 billion fund was considering how to use the new S&P Dow Jones ‘Long-term Value Creation Global Index’ (LTVC) in its portfolio.
Orr said the new index, which was touted in a report published last year by a global think-tank called ‘Focusing Capital on the Long Term’ (FCLT), fits closely with the NZS investing philosophy.
“Traditional market practices and products have not always been conducive to [long-term investing],” he said in the statement. “We are pleased to see ideas raised through the FCLT take practical form in this important new index for global markets. The index is smart and innovative and we will be looking hard at how we might add it to our toolkit for long-term investing.”
While the NZS has yet to put down real money against the index, other investors in the launch group – including the over C$270 billion Canadian Pension Plan Investment Board (CPPIB) – have committed a total of about US$2 billion to the LTVC.
“The S&P LTVC Global Index allows long-term investors to put their money where their mouth is, and we at CPPIB are doing just that,” CPPIB chief executive, Mark Wiseman, said.
According to the Davos release, the LTVC index includes companies that demonstrate “the ability to manage both current and future economic governance and opportunities by focusing on a long-term strategy”.
However, the index would also take into account traditional financial indicators, the release says.
“The index combines qualitative and quantitative measures into a single metric to determine the potential for long-term value addition,” the statement says, “including qualitative assessments to gauge corporate governance effectiveness and quantitative assessments of drivers of long-term investment returns – return on equity, balance sheet accruals ratio and leverage ratio.”
Zurich-headquartered corporate sustainability advisory firm, RobescoSAM, also provides analysis to help construct the LTVC index.
As well as NZS and CPPIB, other funds supporting the new index include: the US$100 billion Singapore-based government fund, GIC; the similarly-sized Danish pension scheme, ATP; the $154.5 billion Ontario Teachers’ Pension Plan, and; the almost US$200 billion Dutch pension fund services provider, PGGM.
– David Chaplin, Investment News NZ
