Over $100 million will exit New Zealand’s institutional investment market following the closure of the Fonterra Staff Superannuation Scheme.
The Fonterra shut-down is the biggest scheme closure since the $230 million ANZ staff super fund wound up last year.
According to Fonterra scheme chair, Tim McGuinness, the trustees opted to wind down the super fund after the employer decided it would no longer support the offering.
“The Fonterra scheme wasn’t getting any new members,” McGuinness said. “And with the FMC [Financial Markets Conduct Act] changes and the growth of KiwiSaver the employer came to the conclusion to close it to new members.”
He said Fonterra did not want to roll the fund into a master trust, leaving the trustees to determine the fate of the scheme.
“The trustees concluded that it would be in the best interests of the members over the long-run to wind the scheme up,” McGuinness said.
Membership of the Fonterra scheme – originally set up as a super fund for salaried employees operating under predecessor organisation, the NZ Dairy Board – has declined from about 800 to the current 500, he said. According to the latest scheme accounts, the Fonterra fund had about $112 million under management as at June 30 last year.
Under FMC, due for full implementation next December, employer schemes will face increased costs and responsibilities. According to McGuinness, unless schemes had sufficient scale or were subsidised by employers, they may struggle to continue under FMC.
He said super schemes have three options: continue under the stricter FMC regime; roll into a master trust; or, wind up.
“All schemes are coming to their own conclusions,” McGuinness said. “But they’ll have to decide within the next six months.”
The Fonterra scheme should complete its wind-up by early next year, he said, with all investments to be cashed out over the next few months.
About half of the Fonterra scheme funds are invested with AMP Capital while ANZ and Russell Investments manage just under $20 million each for the super fund. Mercer and Harbour Asset Management also look after about $10 million apiece for the Fonterra scheme.
McGuinness is also chair of the larger Dairy Industry super scheme, which reported about $607 million in assets as at March 31 this year, invested across the same manager mix as the Fonterra fund.
He said the Dairy Industry scheme, which services wage-workers in the industry, had sufficient scale to stand alone under the FMC.
McGuinness remains on the boards of the Police and Fire super schemes and was recently appointed a licensed independent trustee (LIT) on the Westpac and Rio Tinto staff super funds.
He is one of only 11 LITs currently listed on the Financial Markets Authority website.
Under the FMC all super schemes will be required to appoint an LIT.