Auckland Mayor Wayne Brown has sparked an online backlash last week over claims made in the wake of the Council’s recent $1.3 billion sale of shares in the city airport.
In a LinkedIn post, Brown states the now-dispatched Auckland Airport share parcel returned just 1 per cent annualised over the last 10 years with the sale proceeds to establish a perpetual fund that “will produce a 7.5% return”.
“I wish I could get access to a fund that gives as much certainty about a 7.5% return! Hopefully Wayne didn’t put it in a Ponzi scheme,” one commentator noted. “… I’m curious to hear how the Financial Markets Authority – New Zealand feel about the representation of financial information being expressed here.”
Brown likely falls outside the purview of the FMA but such apparent promises of consistent returns coming from licensed investment operators would attract regulatory attention.
In fact, council is more circumspect – and curiously precise – in formal communications about the Auckland Future Fund (AFF) established to invest the $1.3 billion haul.
“The council is assuming average annual returns of 7.24% per annum from the fund over the long term, after management costs,” the AFF website says. “Of the projected return, 5.24% will be returned to the council as an annual cash distribution, with the remainder retained to protect the real value of the fund over time. The council may decide to transfer other investments into the fund at a later date.”
Other LinkedIn members also pulled up Brown over the cited figure of 1 per cent annualised return for the Auckland Airport shares during the last decade.
“With respect Mayor Wayne Brown you are not correct, 10 years ago AIA [Auckland Airport] share price was under $4, it is now over $8, in addition AIA has also been paying dividends,” a reader replied.
Regardless of the mayoral marketing position, the AFF is now primed to find a home for the $1.3 billion with a fund manager selection process sure to attract attention from local and offshore providers.
FMA chair, Craig Stobo, along with Elevation Capital founder, Chris Swasbrook, and Public Trust head of corporate trustee services, David Callanan, were named as inaugural AFF board members in September.
The launch of the Auckland fund proper will provide a welcome boost to the local wholesale investment scene, which rarely sees new money enter the system.
A similar estimated $500 million fund, to be established by the sale of its Wellington airport shares, crashed after council back-flipped on the deal in October.
However, the Napier City Council is in the throes of establishing a diversified investment vehicle that would include some exposure to managed funds.