The Tauranga Energy Consumer Trust (TECT) has emerged as the seed investor in the new Mercer global equities index fund.
Mercer launched the international shares index fund late last year with the UK-based Legal & General (L&G) as underlying manager.
According to the TECT website, the trust invests about 60 per cent of its diversified portfolio in global shares, now split between the new Mercer fund and Vanguard (which previously managed the entire offshore equities allocation.
In 2018 TECT more than doubled the size of its diversified portfolio to about $360 million after tipping in $190 million garnered from the sale of shares in Trustpower subsidiary, Tilt Renewables.
TECT initially funded the diversified portfolio with $155 million in 2015 when it sold down 20 million of its then 103 million Trustpower shares. The group still holds about $500 million in Trustpower shares, equating to about a quarter of the power generation and distribution firm.
Headed by general manager Wayne Werder, TECT distributes annual payments to eligible Trustpower consumers (last year totaling $30 million) as well as community donations through a charitable trust. In March last year, TECT dumped a plan that would’ve ended the annual consumer payments in favour of converting to a wholly charitable trust model.
As well as the global shares allocation, TECT invests about 18 per cent of the portfolio in a Mercer ‘real assets’ product, 10 per cent in Australasian equities via a Devon fund and 7 per cent across a range of local private equity vehicles including Continuity, Oriens, Waterman and Pencarrow.
Ed Schuck, head of Fidato Advisory, serves as TECT investment consultant.
At the time of the L&G fund launch, Russell Garrett, Mercer NZ head of institutional wealth, said there was growing demand for passive fund solutions among local wholesale clients. The Mercer fund is structured as a portfolio investment entity (PIE) with several sector exclusions such as controversial weapons and tobacco. Most of the large NZ banks include locally-domiciled index products in their fund arsenals along with the NZX-owned Smartshares and AMP Capital. Vanguard also has a loyal NZ following for its Australian unit trust international shares index products (including through Simplicity and Booster).
“We’ve been pleasantly surprised at the level of demand for the index fund,” Garrett said, with a couple more wholesale clients now on board and several others considering the investment.
Coincidentally last week, L&G report total assets under management breaching the £1 trillion mark for the first time.
While net international inflows dropped to £19.6 billion over the 2018 calendar year from £33 billion in the previous 12-month period, total non-UK L&G assets under management jumped 13 per cent to hit £258 billion.
In a statement, L&G Investment Management chief, Mark Zinkula, said: “International expansion has been a strategic priority, and we have made significant investments and key hires to ensure we have the right platform for long-term growth in all of our key markets.”