The Hawke’s Bay Regional Council (HBRC) has split a $50 million investment mandate between Mercer and FNZC.
As reported last month, the HBRC was seeking a new home for funds left over from the aborted Ruataniwha Water Storage Scheme (RWSS) project in Central Hawke’s Bay.
According to the HBRC statement of investment policy objectives (SIPO), the $50 million pool – currently held in cash – will be divided evenly between growth and income assets with a 10 per cent tolerance either side of the benchmark allocation.
The SIPO shows the growth asset benchmark allocation will cover NZ shares (15 per cent), fully-hedged global equities (29 per cent) as well as 3 per cent apiece in domestic and offshore property. Meanwhile, the HBRC mandate targets global and domestic fixed income investments of 25 per cent and 20 per cent, respectively, with the remainder in cash.
Manton Collings, HBRC chief financial officer, said the money would flow into Mercer and FNZC funds – apportioned evenly – as the council’s term deposits matured.
“We’re still working through the final details of what the [underlying] managed funds will be,” Collings said.
The eventual make-up of the portfolio could possibly deviate from the SIPO after HBRC councillors queried the exclusion of alcohol under the current ethical investment policy.
“During the process of evaluating the investment managers’ proposals it was communicated to staff that the fund managers would require more definitive parameters in order to build an appropriate portfolio,” HBRC October 3 meeting minutes state. “Councillors also questioned the appropriateness of excluding alcohol given Hawke’s Bay is a leader in the wine industry.”
Collings said for the time-being councillors agreed to leave the ethical investment policy as is but may “refine it over time”.
FNZC would invest in a range of exchange-traded funds (ETFs) that could include “small exposures… to the companies your ESG policy wishes to avoid”, documents supplied to the HBRC reveal.
The FNZC document says in order to screen out fossil fuels – part of the HBRC policy – it would have to “construct global equity portfolios predominantly using ETFs focused on industry sectors”.
Mercer put a couple of options on the table: either investing in a multi-manager fund with standard exclusions of controversial weapons and tobacco; or via the group’s socially responsible investment products that include ‘impact investing’ as well as a wider range of exclusions.
Potentially, the HBRC investment mandate could increase almost 200 per cent under proposals tabled by the council earlier this month. The council could secure a financial surplus of about $90 million if a planned ownership restructure of the Napier Port – an HBRC asset – goes ahead.
The HBRC floated four options, currently out for public consultation, to raise funds for a mooted expansion of the flourishing Napier Port including: a rates hike; leasing out the port operations contract; a private equity partnership; or, listing up to 49 per cent of the asset on the NZX.
Collings said the HBRC preferred option of an IPO was expected to leave an excess of about $90 million that would have to be invested either through existing fund managers or via another tender process.
If financing is agreed, the port expansion should begin within the next three years.