by David Chaplin
The NZ$40 billion-odd NZ Superannuation Fund (NZS) has confirmed it will replace the CIO role formally left vacant this June as incumbent, Matt Whineray, ascended to the top job at the organisation.
In a job ad listed last week, the NZS says the CIO role is a “high profile leadership position” with responsibility for managing an investment team of five senior managers.
“The CIO must be intellectually curious with the dexterity to grasp numerous complex and time- sensitive issues concurrently,” the NZS ad says. “While a high level of literacy in the financial markets is important, leadership skills are core to the success of this role in managing the broader investments team and improving culture.”
Whineray, CIO since June 2014, officially took over as NZS CEO in July after serving three months as interim boss, replacing Adrian Orr who left in March to head the Reserve Bank of NZ. NZS general manager portfolio completion, Mark Fennell, assumed Whineray’s duties as acting CIO in March. Meanwhile, NZS has yet to fill the head of investment operations position to replace the departing Nikki Bell.
This year sovereign wealth funds on both sides of the Tasman have seen top-level changes in their respective investment teams with Australia’s A$146 billion Future Fund announcing a major reshuffle in June. Campbell McCulloch is joining Mercer after 11 years at the Future Fund, most recently as head of investment operations, it was announced last week. This followed the departure of Barry Brakey, head of property, in June.
Last week, also, the Future Fund reported a 9.3 per cent return over the 12 months to June 30 after raising its risk exposure during the annual period.
According to the latest portfolio update, the Future Fund – launched in 2006 to help cover Australia’s unfunded public servant superannuation liabilities – clocked up a 10-year annualised return of 8.7 per cent to June 30 against a benchmark 6.6 per cent.
During the latest 12-month period the A$146 billion sovereign wealth fund lowered its cash allocation from about 21 per cent as at last June to just over 15 per cent a year later while raising exposure to equities from 27.8 per cent to more than 32 per cent.
Year-on-year the Future Fund also slightly reduced fixed income investments to 8.9 per cent of the total portfolio (10.6 per cent at June 30, 2017) as both alternative assets and private equity levels jumped to 15.4 per cent and 14.1 per cent from 14.8 per cent and 11.6 per cent, respectively, over the 12-month period.
In a statement last week, David Neal, Future Fund chief executive, said: “In the current environment we retain high levels of portfolio flexibility to both withstand − and potentially take advantage of − any market dislocations that might arise. “We are particularly attracted to investment strategies that are uncorrelated to equity returns, and that are focused on genuine innovation and value creation.”
While it had yet to report June figures, the NZS – which has a broader purpose than the Future Fund – returned 13.2 per cent for the 12 months to May 31 and 9.94 per cent over the 10-year period. NZS has adopted a more aggressive investment stance than the Future Fund with about 65 per cent of the portfolio in global equities – mostly through passive mandates.
The Future Fund also has allocated over 40 per cent to alternative assets – including private equity, hedge funds, timber and property – compared to about 18 per cent for the NZS.
Despite the burst of short-term optimism the Future Fund told media last week that over the longer term “the global economy faces headwinds from ageing demographics and a significant debt burden”.
“We remain alert to a range of uncertainties and risks, including the response of central banks to the changing economic environment, international political tensions and the potential for shocks to investment markets,” the statement says.
“… We maintain our view that prospective long-term real returns are lower relative to history.”
In its ‘Investment Environment Report’ published this July, NZS says: “While the Fund remains strongly weighted towards growth assets, our overall use of active risk remains comparatively low, reflecting our view that many assets are fairly valued.”
However, the NZS report notes the fund had recently bought some direct assets – including Australian farmland and a stake in a NZ agricultural produce exporter – and was “looking to increase its exposure to equity factors”.
As well as the original portfolio, seeded with about A$60 billion in 2006, the Future Fund team is responsible for managing several other Australian government investment initiatives including the Disability Care Australia Fund, the Medical Research Future Fund and two Nation-building Funds.
– Investment News NZ