Super fund let loose on world markets

By JULIE MIDDLETON

More than $7 billion in public money from the public servants' superannuation fund and the National Disaster Fund will be invested in international sharemarkets.

The Government has decided to move $3.5 billion in the Government Superannuation Fund - which has 24,600 contributors and 47,000 pensioners - and the $3 billion national disaster fund which covers the cost of mid-sized earthquakes, from safe but stolid local stocks and bonds on to the sharemarkets.

"We're not making the most of the money. It's plus-plus," said a spokesman for Finance Minister Dr Michael Cullen.

"It's going to reduce the cost of government and it's going to hopefully put more liquidity into capital markets."

The superannuation fund, which closed to new entrants in 1990, is invested in stock and "a few" New Zealand corporate bonds, but returns "a little revenue," said the spokesman.

Spreading out the cash will yield between $14 million and $40 million extra per year, "but it's going to depend on overseas markets and interest rates."

A board is to be established to run the superannuation fund, but a legislative change expected in July will start the "move to best practice portfolio management."

However, diversifying the disaster fund given the unpredictable nature of the stockmarket - and earthquakes - isn't such easy task.

Businesses dealing in commodities which become more valuable after an earthquake - such as concrete and timber companies - are the most likely investments, says the spokesman.

The safest places for the money, he said, will be "counter earthquake-cyclical. It's not just an ordinary fund."

At present, all the disaster fund money, which comes from householders' insurance premiums, is in non-negotiable Government bonds.

They would need to be sold back to the Government before any investments could be made.

The Earthquake Commission, which runs the disaster fund, has yet to produce a diversification plan. A decision is expected no later than the end of the financial year.

However, the spokesman said progress had been made on boosting the performance of the fund.

"I'm surprised it has taken so long, but after many years of people saying it was too hard - successive governments have backed away - we have agreement in principle."

The plans were revealed in Dr Cullen's Budget speech.

Just one other Government-guaranteed fund is invested on the global sharemarket: the local government workers' fund, National Provident, since 1998.

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