The estimated $9 billion Māori investment sector has reached a new level of maturity featuring greater asset diversification, increasing distributions to iwi members and an influx of management expertise, according to TDB Advisory director, Phil Barry.
“There’s been increasing diversification across the board with iwi investing more in assets such as managed funds and private equity,” Barry said.
He said some iwi were also starting to distribute more income, including Ngāi Tahu, which more than doubled its annual member payout over the last year to $55 million.
“And people with more investment skills and experience are joining iwi management companies, which is a good sign,” Barry said.
However, the TDB annual review of the iwi investment universe published last week found a wide variance in performance across the eight groups included in the study.
“The geographical locations of the iwi, their governance structures, the assets they selected at settlement and their subsequent investment decisions have all impacted on their realised rates of return,” the TDB report says. “In addition, the level of diversification and management expertise has played an important role in determining investment performance, especially when the management approach has been relatively active.”
Overall, the collective iwi assets in the TDB study returned 6.7 per cent over 2018, down from almost 10 per cent in the previous annual period. Ngāpuhi, one of the smaller iwi funds, reported the lowest returns last year at 3.7 per cent while the $164 million Raukawa group was the best-performer with 9.5 per cent – one of the only two iwi to exceed the TDB-calculated 2018 benchmark return of 8.5 per cent.
For the five years to the end of 2018, performance ranged between 4 per cent for Ngāti Awa (a new addition to the TDB report in 2018) and Ngāti Porou to 15 per cent for the Auckland iwi Ngāti Whātua Ōrākei.
However, TDB says the returns were not risk-adjusted making a like-for-like comparison difficult.
“It is also important to note that the iwi that received earlier settlements have had a longer period to become experienced investors and develop well-structured organisations and investment policies, potentially leading to better returns today,” the report says. “Some iwi, such as Ngāti Awa, Ngāti Porou, Tūhoe, Raukawa and Waikato-Tainui have been seeking to diversify their portfolios in recent years, as reflected in their more active management approach.”
An increasing number of fund managers are looking to the iwi market with Mint Asset Management, AMP Capital, Milford Asset Management and BlackRock named in the report as having exposure to the sector.
Barry said there was evidence, too, of more collaboration between iwi to drive better investment deals such as a joint initiative between Tainui and Ngāi Tahu – the two biggest funds in the sector with about $2 billion and $1.4 billion under management, respectively.
In an historic agreement, too, over 20 Māori groups chipped in a collective $115 million plus to Te Pūia Tāpapa (or the Māori Direct Investment Fund) last year. The Māori Direct Investment Fund – helped along by the NZ Superannuation Fund – followed decades-long efforts to broker similar arrangements.
“It makes sense for iwi to pool funds, especially the smaller ones so they can keep overheads down,” Barry said.
The eight iwi covered in the TDB report represent about $5.5 billion of the estimated $9 billion paid out by the government in the approximately 75 Treaty of Waitangi settlements. A number of Treaty settlements are pending, with the Northland-based Ngāpuhi the largest outstanding claim.
TDB is a Wellington-based corporate finance and economic advisory firm.