New Zealand’s state-owned investor, NZ Super, has taken a bold step with a direct investment worth almost US$300 million in financial services provider Euroclear.
The NZ$65.3 billion (US$38.8 billion) NZ Super is taking a 4.99% slice in the Brussels-based company, which has EUR36 trillion (US$38 trillion) in assets under custody.
The decision is a major turning point for the 22-year-old investor that usually invests through funds, rather than directly. A relative minnow in the sovereign investor universe, NZ Super was created as a government savings vehicle designed to help pre-fund the rising cost of universal retirement benefits. It is an active co-investor, for example forming a joint venture with Canada’s Ontario Teachers’ Pension Plan (OTPP) in August 2020 to acquire Healthscope’s New Zealand pathology business, Asia Pacific Healthcare Group (APHG), with each partner taking 50% in the NZ$570 million deal.
While NZ Super has originated its own direct investments over the years, they are relatively few and oriented towards New Zealand. Its real estate, timberland and private equity direct investments are decisively antipodean.
NZ Super Fund Head of Direct Investments Will Goodwin said the Euroclear transaction, which makes the NZ Super Fund the company’s fifth-largest shareholder, provided a rare opportunity for the NZ Super Fund to increase its exposure to the global financial services sector.
He said, “It is an attractive, high-performing asset which suits our growth profile and will help diversify our investment portfolio. NZ Super Fund will provide the type of stable and patient capital ideally suited to our growth strategy, which is focused on enhancing the value provided to investors, issuers, broker dealers, shareholders and communities through our core product and service offering, while upgrading our capabilities in ESG, data, digital and, as we continue to expand, our geographic reach.”
The kiwi fund has so far produced relatively strong results, with a net return of 4.3% in the 11 months of FY2022/23; the financial year runs until end-June, but full-year figures are not yet available. Since inception in 2001, NZ Super has returned a net average of 6.2% with a value add of 1.5% per annum. The average return for a SOI in FY2013-2022 was 6.6%, with NZ Super leading the pack with 12.1%.
In Global SWF’s ranking of funds by governance, sustainability and resilience, NZ Super comes joint first with Temasek, NSIA and CDPQ with a 100% score.
NZ Super Fund's CEO, Matt Whineray, announced in May that he will be leaving his post at the end of the year after 15 years at the fund. Until then, he is working with the Board of Guardians to lead a number of programs of work that will double the fund's size in the next decade, and to assist them in the search for his replacement.
The Super Fund was created by a Labour-led Government in 2001 to smooth the cost of superannuation between current taxpayers and future generations with investments primarily in foreign assets.
Under the Ardern administration that ended in January, contributions to NZ Super Fund resumed in 2017, eight years after they were stopped by the National-led government as it responded to the global economic crisis. In her tenure, NZ$7.52 billion was transferred to the SWF, while the fund grew by NZ$20.33 billion to NZ$55.7 billion (US$34.2 billion) by end-FY2021/22 – an increase of 57% from 2017.
According to NZ Super Fund’s FY2021/22 annual report, while net contributions over the history of the fund totalled NZ$12.6 billion, it earned NZ$34.6 billion more for taxpayers than the cost to the Government to fund it – as such, the fund has proven its ability to deliver superior returns.
