NZ Super awards first merger arb mandate

Mar 1, 2016

Matt Whineray, chief investment officer of the New Zealand Superannuation Fund, says the $200 million strategy fits well with its long-term growth approach.

NZ Super awards first merger arb mandate

New Zealand Superannuation Fund has appointed a subsidiary of Ramius, the investment arm of US financial services firm Cowen Group, to manage a $200 million merger arbitrage mandate, effective from March 1.

This is the state pension’s first investment in merger arbitrage and will focus mainly on listed companies in Europe and North America.

Merger arbitrage aims to earn steady returns over the long term by realising value from targeted M&A deals across a broad range of industries. NZ Super and Ramius declined to disclose portfolio specifics or return targets.

Matt Whineray, NZ Super’s chief investment officer, said the fund was in a good position to benefit from such strategies because of its long investment horizon.

NZ Super is investing in a private fund, Ramius Merger, rather than a fund of funds. The strategy takes long and short exposure across a broad security selection, said a Ramius spokesman.

Michael Singer, chief executive of Ramius, which had $13.8 billion under management as of October, describes its merger arb strategy as focusing on liquid, fundamental research-driven investments.

NZ Super’s alternative mandates tend to range between $100 million and $500 million, using managers including Apollo, AQR, Bridgewater, Canyon Capital, DE Shaw, HarbourVest and Sankaty Advisors. Of the total portfolio, around 20% is invested in private equity and debt, real estate and infrastructure.

Around two-thirds of NZ Super’s assets are managed passively in line with global index benchmarks, and 60% of the overall portfolio is focused on global equity markets.

The retirement fund, which won the Governance award as part of AsianInvestor’s Institutional Excellence Awards last year, had NZ$28.3 billion ($18.8 billion) in AUM as at January 31, 2016. It has returned 9.2% annualised since inception in 2003.

Perfomance in the three years to end-2015 has been particularly strong at an annualised 15.23%, but in 2015 it returned 6.52%, and the fund expects returns to remain relatively lower in the coming years.