Guardians expected to be conservative
The Guardians of the New Zealand Superannuation Fund are due to announce their asset allocation strategy on Thursday. Rob Hosking looks at how the multi-billion fund may be invested.
Tuesday, August 12th 2003, 2:29PM
by Rob Hosking
The question is whether the Guardians will dip their toes in the water of the local pool – or launch themselves in like an over-exuberant, obese teenager doing a bomb dive into a family pool?
The pressure has been there, mostly, for something at the big bomb end of the scale. Both Green and United Future MPs, plus several regional mayors have called on the government to put a great proportion of the funds onshore.
And New Zealand Stock Exchange chief executive Mark Weldon has lobbied for nearly a third of the fund – which will eventually reach around $50 billion – to be kept within New Zealand.
But the size of the fund – which currently stands at $2 billion – can be overstated, says JB Were strategist Campbell Millar.
“It’s become over-hyped. It’s such a nice plausible simple story, but the reality is that it may not be as big as it seemed to be a year ago.”
Turnover on the NZX has picked up from $40 million a day to around $100 million.
That makes any New Zealand Superannuation Fund investments far more digestible. Few think the Guardians will answer Weldon’s call for nearly a third of the fund to stay within New Zealand.
“I think they’ve been quite clear not going to be influenced by politicians or Mark Weldon. They have an incredibly long-term mandate and they will remember that,” Millar says.
Macquarie New Zealand senior investment analyst Arthur Lim believes the Guardians will almost definitely take an orthodox portfolio approach.
“It would be highly unlikely that something as significant as this would not to take the conventional approach.”
However he says that, as the fund develops, a preparedness to take an unconventional stance may well become a real challenge for the Guardians.
“Are they going to be flexible enough? Are they going to be unconventional enough that when markets are seriously out of synch with longer term trend(as they were during the hype of the dot.com boom) they will take an unconventional asset allocation?”
The most likely framework to be announced on Thursday will be a short term – probably three years – and a long term strategy.
“They may look at something like 10 to 15% in New Zealand equities in the short term,” Millar says.
There have already been clear signals that the Guardians are prepared to look at alternative asset classes – private equity, hedge funds, property trusts and the like.
“I think they’re going to be guided by opportunities, and on the private equity side the only major one presenting itself at present is the National Bank.”
Included in this group is infrastructure, and there is little doubt that putting money into Auckland’s roads would ally some of the political criticism of the fund.
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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