The innocuous release (which can be read here) about the $3.4 billion Government Superannuation Fund announced that the government had decided to allow the fund to diversify its investments and the it would be managed by professional fund managers.
Currently the fund, which manages super schemes for Government employees (it's got nothing to do with New Zealand Superannuation - the state pension), invests all its money in a conservative portfolio of cash and fixed interest.
Cullen says by giving the GSF a mandate that will allow it to invest in a properly diversified portfolio of cash, bonds, shares and property, the fund will increase its returns. Therefore the Crown will be able to reduce its annual cash contributions by between $14 million and $44 million a year.
To anyone who knows anything about modern portfolio theory and the need for proper diversification the moves are sensible, and some would suggest long overdue.
However, it raises an interesting point about the proposed dedicated fund, and a potential flash point for discussions between Labour and the Alliance.
The GSF changes show Cullen understands the need for diversification and the benefits of exposure to offshore assets.
The question is how will this approach be reconciled with the Alliance's stated desire for the proposed dedicated super fund to invest mainly in New Zealand assets and businesses?
Alliance leader Jim Anderton, who has at best been lukewarm on the dedicated fund proposal, has clearly stated that his party could only support the fund if it invests in New Zealand.
The second key point in the GSF announcement is that the fund's governance will be changed so there is no conflict between GSF and the Minister of Finance.
Cullen says a GSF Board will be set up as a Crown Entity to ensure the assets are invested on a sound commercial basis, and that this board will have the use of the management and support services of the National Provident Fund.
The board will use the services of professional fund managers to invest GSF's money in growth asset classes.
One of the major criticisms of the proposed dedicated super fund is that it would be run by what is known as a board of guardians who would use private sector fund managers to invest the money.
The changes to the GSF are in effect a dummy run for the dedicated fund's governance structure.
Cullen's announcement shows that the Government understands some of the issues surrounding prudent investment. What's more it is likely to get industry support because the GSF money is a significant new mandate which is up for grabs in what is a competitive business funds management industry working on shrinking margins.
Whoever wins the business will become a showcase for the industry. They will be under close scrutiny so they will have to produce the performance which convinces both the Government that private sector managers are up to running a large state fund well, and the public that the industry can do a good job with their money.
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