Inside Money: The quiet investor - no noise as ACC makes big appointment

Guy Elliffe, former head of NZ equities for AMP Capital. Photo / Mark Mitchell

According to the latest government financial statements, the Accident Compensation Commission (ACC) houses New Zealand's largest fund manager.

The Treasury figures put the ACC portfolio at just over $33 billion as at end of February this year, compared to $29.6 billion for its much more high-profile cousin, the New Zealand Superannuation Fund (NZS).

Unlike the NZS, of course, the ACC fund is receiving regular annual top-ups from the government - well over $2 billion in the last financial year - in addition to an impeccable long-term investment performance that averaged almost 10 per cent annually over the last 20 years.

In its 2013/14 annual report, the ACC fund recorded annual returns of 6.33 per cent, outperforming its benchmarks for the 19th year in a row but only by a slim 0.1 per cent margin.

"... this was the first time in that period that ACC's outperformance did not exceed the costs of managing investments," the 2014 report says.

"Most of ACC's investment portfolios outperformed their benchmarks during the year (particularly ACC's bond portfolios and internally managed equity portfolios), but this outperformance was offset by a negative contribution from our asset allocation decisions."

In particular, the ACC fund was underweight equities and overweight unhedged global currencies (relative to its respective benchmarks).

The ACC fund, however, has an inherent cautious nature - given its mandate to eventually cover the costs of ACC claims - and has about half as much invested in shares compared to the NZS, for example.

"... when we allocate funds between investment markets, we typically have a lower proportion of our funds invested in equities and a higher allocation to long-duration bonds than most other funds, and this liability-aware allocation approach would have hurt our performance in comparison with other funds during the year," the 2014 report says.

Despite that, the ACC fund is the biggest player in the local stock market than NZS, holding approximately $2.8 billion in NZ equities as at June 2014 - equating to about 4.5 per cent of freely available shares on the NZX.

But for all its importance in NZ capital markets, the ACC fund is notoriously publicity-shy. There are no regular monthly performance updates, a la NZS , for example. And discovering which underlying fund managers the ACC invests in can be a chore.

Similarly, the ACC fund just quietly appointed former AMP NZ equities chief, Guy Eliffe, to a new position last week. As reported here Eliffe has taken on the big job of ACC corporate governance manager investments.