The New Zealand Superannuation Fund (NZS) is searching for a new head of NZ direct investments following the resignation of incumbent, Michael Gleissner, last week.
Gleissner, who joined NZS two years ago, “is leaving to focus on family commitments and consulting activities”, a spokesperson for the almost $30 billion fund said.
Until a replacement is found, Matt Whineray, NZS chief investment officer, would assume Gleissner’s responsibilities, the spokesperson said.
The NZ Direct team manages NZS investments in Kaingaroa Timberlands, rural land, Datacom and Metlifecare.
Earlier this month, foundation executive, Tim Mitchell, finished up at NZS after 12 years service at the fund. Mitchell, who ended his NZS career in a strategic advice role, will not be replaced.
Last week the NZS also celebrated earning the accolade of world’s best-performing sovereign wealth fund (SWF) by JP Morgan Asset Management. In a just-published research piece, JP Morgan reported NZS returned of a tad over 17 per cent annually in the five years to June this year – almost 5 per cent more than the second-placed US$344 billion Government of Singapore Investment Corp (GIC).
The US$180 billion Temasek, another Singapore-based SWF, returned 11 per cent annually over the same period while the A$117 billion Australian Future Fund rounded out the double-digit performers with a 10.4 per cent annual return during the five-year timeframe.
In the report titled ‘Taking the long view’, JP Morgan attributed much of the outperformance of eight top-performing SWFs to their exposures to alternative, illiquid assets.
“The median allocation to alternatives among the eight funds amounted to 18.5% of the total portfolio,” the JP Morgan study says. “Returns for the funds with above-median allocations beat the conventional 60/40 benchmark allocation return by 551 basis points and beat the returns of the below-median funds by 316 basis points annually.
“The top four performers among the eight SWFs, with alternatives allocations ranging from 16% to more than 35% with a mean of 26%, beat the benchmark by an average of 671 basis points.”
However, the report notes SWF appetite for alternative assets can squeeze returns as funds flow increases. For example, from 2010 to 2014 SWF investments in direct real estate “expanded seven-fold”, JP Morgan says.
“The flood of investment has compressed the yield spread between risk-free assets and prime properties to the point where the income from prime properties in some markets has fallen below that from investment-grade corporate bonds,” the report says.
The study says SWFs are well-placed to pursue a range of alternative asset strategies including infrastructure, shipping and private debt.
In particular, post GFC re-regulation including Basel III bank capital requirements could open up new investment avenues for patient investors such as SWFs.
“To meet this requirement, we expect some [banks] to reduce their loan books, creating distortions and opportunities in the marketplace, especially in Europe where bank lending predominates,” the report says.
In February, NZS revealed it was embroiled in a legal dispute with the Portuguese government to recover a US$200 million loan to Banco Espirito Santo (BES) made via a Goldman Sachs-engineered investment vehicle, Oak Capital.
The case, which may take years to untangle, was due to enter jurisdiction hearings in UK courts later in July, the NZS spokesperson said.
According to a Wall St Journal (WSJ) article published last month, the Portuguese central bank has imposed fines of up to €4 million on 15 former BES employees for “selling the debt of its parent when it was already known the lender was in trouble”.
“Bank of Portugal said it is also investigating other issues surrounding Banco Espírito Santo’s collapse, including what Governor Carlos Costa called “a fraudulent funding scheme between the companies belonging to the group” involving offshore vehicles,” the WSJ story says.
Last week NZS promoted, Cristina Billet, to the newly-created position of head of legal. Named public sector lawyer of the year in 2014 by the Corporate Lawyers Association of New Zealand (CLANZ), Billet has been with the NZS for six years.
