To execute on its plans, NZ Super has increased staffing in its direct investment team and is in the process of establishing its Investment Hub, an initiative which will look at new and larger direct investment opportunities in the New Zealand market. The fund now has a team of 127 people as it looks to manage more investments in-house.
“We are actively building the capability of our internal investment team as we look to manage our investments as directly as possible and maximise cost-efficiency, Adrian Orr, chief executive of NZ Super, said in the report.
The fund, one of the largest institutional investors in the country with NZ$4.9 billion ($3.5 billion; €3 billion) worth of domestic holdings, currently holds stakes in IT services company Datacom, local retail bank Kiwibank and Kaingaroa Timberlands. Investments have also been made in residential property in Hobsonville and rural land across the country.
NZ Super is unable to take controlling stakes in an operating company and therefore targets minority stakes, typically a 20 percent to 50 percent, in large transactions, often over NZ$100 million.
Despite gearing up for greater investment activity at home the fund did not make any new international direct investments in 2016/17 due to expensive asset prices, it said in the report.
Its current overseas direct investments include Illinois-headquartered waste-to-energy company LanzaTech and Milpitas, California-based smart glass company View.
For private equity, the investor has invested 5.5 percent of its total investment portfolio, as of end June 2017, a marginal increase from last year’s 4.7 percent. The investor, however, does not have any plans to change its exposure to the asset class at the present time and will continue investing opportunistically, an NZ Super spokesperson told Private Equity International in February.
NZ Super committed NZ$260 million in December 2016 to Direct Capital, Pioneer Capital and Movac. The three mandates target different parts of the expansion capital stage of the private equity market in New Zealand, with Direct Capital operating at the larger end, Pioneer targeting mid-market companies seeking international growth and Movac focused on earlier stage, high growth companies. Each fund is expected to invest in between eight and 15 individual companies.
Along with generating domestic proprietary deal flow, climate change is another priority for the Auckland-based investor. It introduced a comprehensive strategy to address climate change investment risk in October 2016, reallocating nearly NZ$1 billion away from companies with high exposure to carbon emissions.
Total assets of the fund now stand at NZ$35.4 billion before New Zealand tax compared with NZ$30.1 billion last year. It achieved a 20.7 percent annual return in the 12 months ending June 2017, one of its strongest on record, reflected by a sustained rally in global equity markets, it said in the report.