The Hawke’s Bay Regional Council (HBRC) has put a $150 million wholesale mandate in play after consolidating investment assets in a single entity and dialling up its risk profile late last year.
As part of the strategic rethink, the Council delegated management of all investment assets to the Hawke’s Bay Regional Investment Company (HBRIC) subsidiary in December, opening up its $150 million managed funds portfolio to tender.
Jarden and Mercer currently share management duties of the fund portfolio, which was split between direct Council-controlled assets and about $50 million held in a HBRIC portfolio.
Meeting minutes show the Council tapped “six parties” to bid for a combined $150 million managed funds mandate with a mid-February deadline: a final decision is expected soon.
Under a newly adopted statement of investment policy and objectives (SIPO), the HBRC lifted the fund strategic asset allocation from “a 50:50 fully hedged growth/defensive allocation to a 70:30 partially hedged growth / defensive allocation”, according to the minutes.
The up-risking followed a review that found “the Group’s circa $150m managed funds portfolio was too defensively positioned in the context of the Group’s investment goals and wider mix of investment property and infrastructure assets owned”.
Once implemented, the higher-risk style was projected to add about 1 per cent each year on average over the long term above the current portfolio settings.
HBRIC formed in 2018 primarily to manage the Council’s shares in the newly listed Napier Port as well as some other infrastructure assets and the $50 million fund portfolio (leftover from money previously earmarked for a later abandoned Central Hawke’s Bay dam).
However, HBRIC will now take full charge of other Council assets including forestry, investment property and the $100 million held in managed funds.
The new SIPO requires “fund managers to take into account the Group’s wider investment portfolio when building fund allocations”
Furthermore, the Council has updated the previous ethical overlay to a responsible investment policy “based on a combination of principles and exclusions”.
“The Group will draw on the examples of leading Crown-owned investment institutions,” HBRC minutes show.
HBRC requested prospective managers to include ethical considerations in the original 2018 fund proposal, triggering a philosophical dilemma for the council.
“Councillors also questioned the appropriateness of excluding alcohol given Hawke’s Bay is a leader in the wine industry,” minutes from a 2018 HBRC meeting note.