New Zealand Super cuts manager roster

The New Zealand Superannuation Fund has made the second in what is likely to be a series of private-market divestments aimed at consolidating its base of external managers.

The state institution said yesterday that it had agreed the sale of investments in five offshore private equity real estate funds to investors advised by affiliates of Partners Group, a private markets asset manager based in Switzerland.

NZ Super has now divested nine of its 46 incumbent managers since July. The fund did not divulge the value of the investments, but its accounts for 2015 show there had been NZ$565 million ($381 million) invested in the nine funds.

“While private equity real estate has been a profitable part of the fund’s portfolio, these were relatively small investments," said Fiona Mackenzie, NZ Super's head of investments. The move to sell them is consistent with the fund's strategy to have fewer, deeper relationships with its investment managers, she added.

NZ Super did not disclose the sale price, but Mackenzie noted: “It is pleasing to be able to realise gains from a part of the fund’s portfolio that has performed strongly in recent years.”

The first round of disposals took place in mid-April, when the fund exited investments in three offshore PE funds: Hellman & Friedman VII, JMI Equity Fund VII and HIG Bayside Loan Opportunities Fund II.

None of the funds sold in the two tranches included New Zealand assets. The Gateway fund, run by Hong Kong-based Gaw Capital, is focused on China and Southeast Asia real estate. Hellman & Friedman has a media, financial services, software and data services focus. HIG is a distressed senior debt vehicle invested in US and European small-caps. JMI is focused on software, internet and healthcare IT companies in the US. Mountgrange and MoREOF are UK property vehicles.

The Orion European Real Estate fund portfolio includes 100 Cheapside, an office building in the City of London, and the Qwartz shopping centre site in Paris, overlooking the river Seine. 

An NZ Super spokesperson said the two divestment tranches were related in that they were consistent with the strategy of having fewer and deeper relationships with their external partners.

The fund would not be drawn on whether more divestments would follow. However, from the list of investment holdings, there are several others that would fall into the same category as those being divested now – relatively small amounts invested in unlisted assets outside New Zealand. Hence it seems likely that there are further exits to come.

In respect of geographic allocation, the fund has seen a more than 50% rise in its exposure to Asia ex-Japan in the 12 months to June 2015, according to its annual report issued in March (see table below).