Inside Money: NZ Super change to excite local share managers

NZ Superannuation Fund, led by chief executive Adrian Orr, has taken direct control of the almost $260 million in local equities formerly managed on its behalf by AMP Capital. Photo / NZ Herald

A slew of substantial shareholder (SSH) notices hit the NZX this week as the New Zealand Superannuation Fund (NZS) began to take direct control of the almost $260 million in local equities formerly managed on its behalf by AMP Capital.

I like the one headed "Her Majesty the Queen..." , detailing the change in management of NZS' stake in Air New Zealand but at the time of writing, AMP and NZS have published respective SSHs for eight other companies that probably better reflect the nature of the handover.

While the NZS won't say, the decision to axe AMP was almost certainly sparked by management changes at the funds firm (published here last week).

For the time-being, the AMP holdings will be managed by the recently-established NZS in-house local equities team but according to NZS spokeswoman, Catherine Etheredge, an "extensive manager search" will begin shortly.

The in-house team would probably face "capacity issues" if it took on the AMP holdings permanently, Etheredge says.

The recent NZS review conducted by consultancy firm, Promontory says the fund's in-house NZ active equities unit, established in November 2013, should be able to "add value relative to the passive mandate".

According to the Promontory report, as at May this year, the NZS in-house team managed about $526 million of local shares.

"... (a part of this has been managed passively and a part actively, with the actively managed part increasing steadily over time), with a further $890m by the three external managers (representing approximately 5% of the Fund and around 2.4% of the NZX50 index capitalisation)," the report says.

However, Promontory also notes the NZS should be aware that "executing a substantial equity or derivative transaction in a small market (e.g. New Zealand equities) can result in shifting the market".

Adding in the AMP mandate would take NZS in-house local equities portfolio over $750 million.

However, Etheredge, says transferring the AMP portfolio to the in-house team would not impact share prices as NZS already owned the underlying securities so no trading was necessary.

Potential replacement managers are no doubt polishing off their NZS pitches with a few obvious contenders coming to mind such as boutique NZ funds firms Harbour, Mint, Salt, Castlepoint and Forte (run by ex AMP manager, John Phipps). Even Fisher Funds might give it another crack despite losing an NZS mandate in 2008.