AMP Henderson will manage a portfolio which has moderate deviation from the index and performance will be benchmarked against the NZSX50 index. This is expected to grow to around $100 million over the next year.
Brook Asset Management’s portfolio will be of a similar size but will be assessed against a tailored benchmark designed to provide the flexibility to construct an actively managed portfolio with less focus on the NZSX50 index.
Two more New Zealand equity managers will be chosen before the end of the year to manage the remainder of the allocation to listed New Zealand equities. Both will manage portfolios to benchmarks with even less similarity to the composition of the NZSX50 giving them more scope to invest in small and medium sized companies.
This will mean that the fund will be expected to have around $300 million invested in the local equity market by June 2004, rising to approximately $7.6 billion within 20 years.
Chief executive Paul Costello said AMP Henderson and Brook had been chosen following an extensive selection process including interviews with all New Zealand managers whose investment approach was consistent with the two mandates. Mercer Investment Consulting assisted the Board with the selection process.
AMP Henderson Global Investors is AMP’s specialist fund manager and the New Zealand arm manages more than $580 million in domestic equity mandates. Brook is an Auckland based investment management firm specialising in New Zealand and Australian shares. The firm has approximately $430 million under management.
Costello said the performances of the two chosen fund managers would be reviewed regularly and they will be expected to outperform the market after fees over reasonable periods of time. Managers are hired under agreements which provide for their immediate termination if the Guardians of New Zealand Superannuation form the view that they should no longer manage the Fund’s assets.
The NZ Superannuation Fund’s overall performance target is to exceed the risk-free rate of return (commonly regarded as the interest rate on cash) by 2.5% p.a. over rolling 20-year periods. It is unlikely that this would be achieved in the first year given the large proportion of the assets which will be held in cash during the year as the investment portfolio is built.
Costello said the fund was working towards finalising the process of ensuring a smooth transition of its assets, currently held in cash, to the chosen fund managers with particular emphasis on reducing the market impact of the transition.
The appointments of investment managers for the New Zealand fixed interest sector, as well as the first international equities manager, are expected to be confirmed later in September.
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