BNZ has reset asset allocation for its range of retail funds, including KiwiSaver, upping exposure to Australasian equities in a move that has secured the first major institutional mandate for Castle Point Funds Management.
Under the BNZ asset allocation makeover, Castle Point joins Mint and Nikko on the panel of Australasian share managers.
The BNZ changes include increasing the equities exposure (both global and Australasian) of its growth and balanced funds by 10 per cent while cutting fixed income holdings. For the growth fund, BNZ has scaled back the target cash allocation to 1 per cent (from 5 per cent previously) with an upper limit of 10 per cent (down from 35 per cent).
At the same, BNZ increased the overall growth exposure of the moderate fund by 5 per cent, lifting allocations to equities (local and offshore) and cash while cutting bond holdings.
The bank has kept the overall conservative fund risk levels static but altered the mix by increasing its allocation to bonds and Australasian equities at the expense of cash and international shares.
In a note to clients, Peter Forster, BNZ general manager wealth, said: “We want our funds to be better positioned for the future. We’ve worked with specialist advisers to help us determine the mix of income and growth assets to hold in each fund based on an assessment of global events and market impacts, and how different types of assets may perform.”
The portfolio revamp takes effect on October 30.
BNZ is advised by Australian investment consultancy, JANA. Until recently JANA was part-owned by BNZ parent, National Australia Bank (NAB), but the equity interest was sold to the ASX-listed IOOF early in September after it acquired the MLC wealth management business.
The BNZ KiwiSaver, and YouWealth, funds moved to a passive exposure for global equities and fixed income assets last year, replacing respective portfolios managed by JANA and Russell Investments with Vanguard index mandates. However, the bank appointed Mint and Nikko to run active Australasian share portfolios: Nikko and AMP Capital manage the BNZ local fixed income assets.
Castle Point would likely share equally with Mint and Nikko in an enlarged BNZ Australasian equities pool. The almost $3 billion BNZ KiwiSaver scheme, which represents the largest component of the bank’s retail funds, reported almost $300 million in Australasian shares as at March 31 this year.
Richard Stubbs, Castle Point co-founder, said the BNZ win was the Auckland-based boutique’s “first institutional IMA [individually managed account]”.
“[The mandate] is an endorsement by one of NZ’s leading banks and a major investment consultant,” Stubbs said. “It’s a sign that Castle Point is now truly part of the NZ investment landscape,”
Excluding the new BNZ gig, he said the firm had about $750 million “under management and advice” including just over $200 million in the Castle Point suite of three retail funds.
“We started with pretty much nothing seven years ago,” Stubbs said. “It’s taken longer than we planned [to reach scale] but we’re now seeing greater interest from consultants, advisers and retail investors.”
Also last week, the Generate KiwiSaver scheme joined the growing trend to impact investing in NZ with a $15 million allocation to a fixed income fund backing a Salvation Army social housing project.
Generate was the lead investor in the new Salvation Army Community Bond – a five-year fixed interest security returning 2.3 per cent per annum – and the first KiwiSaver scheme to allocate to a focused impact fund.
Sam Goldwater, Generate lead portfolio manager, said the Salvation Army bond investment was “the right thing to do for our KiwiSaver investors and for New Zealand in this time of great need”.
“With this first impact investment, Generate is proving how large institutional investors can balance achieving competitive returns and enabling positive social outcomes,” Goldwater said. “We hope others will follow our lead.”
Foundation North, the $1.4 billion Auckland-based community trust, also tipped in $2 million to the Salvation Army housing impact investment in August.
Somewhat controversially, last year the ASB KiwiSaver scheme launched the ‘Positive Impact Fund’, which invests in a diversified Mercer multi-manager portfolio that has “a preference for investments that generate a positive and measurable social and/or environmental impact, alongside a financial return”.
However, the Generate investment fits more the ‘pure’ impact model targeting identifiable social projects. Over the last couple of years a number of impact funds have entered the market, most recently a $50 million vehicle announced by the Accident Compensation Corporation (ACC).
Other impact ventures such as the Trust Waikato-backed Te Puna Hapori and the Purpose funds have raised capital in the previous 12 months. Te Puna Hapori appointed Australian impact specialist, Brightlight, as the underlying manager.
The Salvation Army housing bond is managed by Community Finance, another impact investing collective backed by Christian Savings, the Matua Foundation and a range of family-based charities including the Tindall Foundation, the Lindsay Foundation and the Wilberforce Foundation.