Now this is a merger: NZ mulls mega-fund

The New Zealand government could create a single NZ$40 billion ($30 billion) fund under a proposal mooted in its inaugural ‘Investment Statement’ published this month.

If adopted, the proposal – classified as one of the “high level choices in the financial portfolio” – would impose a central investment structure across all Crown Financial Institutions (CFI), which include the $13 billion New Zealand Superannuation Fund and the $9.7 billion Accident Compensation Corporation (ACC) fund.

“At present the five CFIs are separate entities,” the government Investment Statement says. “A single fund manager across CFIs might increase efficiency and overall performance, and enable better aggregate risk management across the financial portfolio.”

As well as the ACC and NZ Super funds, CFIs also include the $4.5 billion Earthquake Corporation (EQC) fund and the $2.2 billion Government Superannuation Fund (GSF).

While classed as a CFI, the $1.35 billion National Provident Fund manages the private savings of individuals across several industry groups and falls under the government purview because it carries a Crown guarantee.

A spokesperson for the office of Finance Minister Bill English said the options included in the Investment Statement represented an “initial stocktake” of Crown assets and were not government policy.

“No decisions have been made or any in-depth analysis of the pros and cons [of creating a single CFI fund] has been carried out,” the spokesperson said.

Paul Dyer, economic adviser to Bill English, formerly held high-level investment positions at both NZ Super and the ACC fund.

The Investment Statement, also reveals the government would review the size and asset mix of the EQC fund (officially called the National Disaster Fund or NDF) following the massive earthquake that hit Christchurch this September.

“Both issues will need to be reassessed in the light of the Canterbury earthquake, which is likely to result in payments from the NDF of up to $1.1 billion,” the Investment Statement says.