Iwi investment entities had become increasingly diversified over 2017 with some local fund managers benefiting from the move, according to a new report on the sector, in a year that saw assets jump by almost $2 billion.
The Wellington-based TDB Advisory 2017 review of iwi investments found at least three groups – Ngāti Porou, Raukawa, and Waikato-Tainui – began to “further diversify their portfolios through indirect investments in equities and some direct investments”.
During the 12-month period the $58 million Ngāpuhi, the smallest of the eight iwi funds in the TDB review, also adopted a more aggressive investment stance with a new allocation to growth assets.
“Ngāpuhi sold its BNZ bond portfolio of $1.5m and combined with $6.5m in cash equivalents, invested in a Mint Asset Income fund, which holds a portfolio of fixed income and equity securities,” the TDB report says.
The almost $150 million South Waikato Raukawa fund, included for the first time in the TDB analysis, also added Mint to its list in 2017 along with wholesale Australasian equities shop, Aspiring Asset Management. With the two new additions (each awarded $2.5 million), Raukawa now boasts five external managers on its roster, despite cutting its overall fund exposure from about $65 million in 2016 to $53 million last year.
Incumbent managers – Milford, Harbour and Schroders – all saw their mandates pared back to accommodate the new allocations plus a $12 million transfer to cash to help fund imminent direct investment opportunities.
“As is our habit, [Raukawa] is currently assessing 2–3 major direct investment opportunities and have already undertaken substantial negotiation,” the group’s 2017 annual report says. “We believe it is likely that we will deploy in the region of $20m–$30m into direct investments in the coming year, which will be the culmination of more than a year’s work.”
The Raukawa iwi fund replaced the similarly-sized Wellington Port Nicholson Block Trust in the 2017 TDB report following the latter’s restructuring announcement.
Raukawa invests about a third of its assets in managed funds, a proportion surpassed only by the Urewera-headquartered Tūhoe, which has just over half of the iwi’s $348 million portfolio invested across four managers, and Ngāti Porou (roughly 60 per cent in equities).
Tūhoe uses First NZ Capital, NZAM, AMP Capital, and ANZ, while Ngāti Porou has outsourced to Milford and BlackRock.
On average the eight funds, which make about 60 per cent of iwi assets, returned just over 10 per cent over the last financial year ranging from 3 per cent for the commercial property-heavy Rangitāne o Wairau to 16 per cent for the property-only Auckland-based Ngāti Whātua Ōrākei.
Overall assets under management across the eight iwi hit $7.8 billion in 2017, according to TDB estimates, compared to about $6 billion in the previous year’s report.
The TDB study says the iwi funds fit into two main groups – a group of four focused on property and real assets, and three iwi (Ngāti Porou, Raukawa and Tūhoe) – that “have made a distinct effort to diversify their portfolios”.
“The final iwi is Ngāpuhi, which is yet to settle with the Crown, other than through the Treaty of Waitangi fisheries settlement,” the report says.
Most iwi funds have a conservative bent, the report says, albeit with some access to Crown assets on a “first rights of refusal basis” and a tax advantage under the 17.5 per cent Māori authority rate.
“Iwi also tend to have long time horizons, are reluctant to report negative returns (and therefore can have a low tolerance for risk) and, as noted above, tend to have a strong home bias in their investment strategies,” the TDB study says.
Last year, TDB director, Phil Barry, said external fund managers were gaining some traction with iwi investors seeking diversification.
“But maybe those that are using fund managers might take more in-house as they gain confidence about investing themselves directly,” Barry said at the time.