The New Zealand Superannuation Fund wants to design, build and own major public infrastructure in New Zealand.
It still wants the Ministry of Transport to give it the go-ahead to develop and operate the Auckland light rail, but is eyeing other potential opportunities, like a second Auckland harbour crossing, wastewater/drinking water/stormwater projects and a re-purposing of the aluminium smelter at Tiwai Point.
The Super Fund’s Head of Direct Investments, Will Goodwin, told interest.co.nz Auckland light rail was “just the start” in terms of the Fund’s pitch for local and central government to use its “public-public” model.
The model sees government identify an infrastructure need, consider a proposal from the Super Fund, and give it the go-ahead to manage the project from A to Z - planning, financing, executing and operating the project.
This would effecitvely put the Fund at the helm of a project, rather than a local council or the Ministry of Transport for example.
Goodwin was confident the Super Fund's mandate to maximise investment returns wouldn't pose a conflict of interest or compromise good outcomes for public infrastructure.
“We need to make sure that what we’re building up-front is the right type of infrastructure for the long-term because we’re going to be owning it. That’s ultimately where we’re going to be driving the profits from,” he said.
“We can work collaboratively to bring it [infrastructure] faster and better than probably what’s been built before. And we can bring it forward.”
Goodwin noted using private capital also frees up public finances.
The Fund wants the law it operates under to be changed to enable it to have controlling stakes in entities.
Currently, section 59 of the New Zealand Superannuation and Retirement Income Act 2001 prohibits the Guardians of the Super Fund from controlling any other entity or holding a percentage of the voting rights in any other entity that would require it to seek control of that entity.
Goodwin said this was restricting the Fund, as it sought to increase its exposure to New Zealand infrastructure.
“As we get bigger, we struggle to find partners that are likely to be of similar scale,” he said.
The Super Fund currently has $51 billion of assets under management. It is expected to reach $100 billion by 2030.
Goodwin said the Fund’s preference was still to partner with others for bigger projects to draw on their expertise and de-risk the investment.
The Fund partnered with Canadian institutional investors, Caisse de Depot et Placement du Quebec in its light rail bid for example.
Goodwin said the Fund had been talking to Treasury about Section 59 of the Act. The decision around whether to tweak or remove it rests with Finance Minister Grant Robertson.
27 Comments
This is an excellent proposal. Having the NZSF driving investment in NZ infrastructure is a "no-brainer". Far better than them investing in offshore equities. That it wasn't a core principle guiding the NZSF when it was set up is a missed opportunity imo. ACC could easily be encouraged to be an investment partner. Between the two of them there could be ~70-80 Billion of investment funds looking for a home - serious money
ABSOLUTELY ABSURD
NZ taxpayers first pay excess tax so it can go to the superfund.
Then the superfund wants to charge New Zealander's commercial rates of return on infrastructure the government could simply borrow for at next to 0%.
This is insanity. Taxpayers fund the superfund which then further chargers NZ infrastructure users.
1) Move the retirement age up. It should be linked to life expectancy
2) Ban the superfund from NZ PPPs. It can go do them overseas, or otherwise require the Superfund to invest in NZ infrastructure at the same rate of return the government can borrow at (& see how that goes down)
3) Wind down the superfund
It's my understanding the NZ Super Fund, is very capably managed. They are all about growing their funds. They wouldn't be personally be managing these projects, rather outsourcing them to those with a track record of success. As they do with their other investments.
Goodwin noted using private capital also frees up public finances.
The Fund wants the law it operates under to be changed to enable it to have controlling stakes in entities.
Mission creep - tell them to stick to their knitting.
If we need competent civil engineers we can look elsewhere.
Absolutely. A bunch of accountants/investment managers running major engineering projects. Even if they appoint some other agency they'll still have a finger in the project pie somewhere along the line. Stick to buying into known successsfuk operational enterprises. Not large construction projects which invariably run millions of dollars over.
I think we dodged a bullet with the super fund getting hold of our transport network. The deal was so bad for for ratepayers I would call it criminal. https://www.greaterauckland.org.nz/2019/10/21/super-fund-mess-will-dela…
Why? Investment funds are for generating returns such as ownership of companies like Microsoft or Unilever.
Does infrastructure generate ROI? It can but the type of infrastructure NZ needs is unlikely to generate a return. Japan has had mixed results. For ex, the privatized highway companies are struggling while privatized railway network is profitable. But we're talking about large-scale infrastructure that NZ would never ever by able to develop or need. How do we expect a Super Fund to generate a return?
Will Goodwin worked for Todd Minerals with responsibilities for investment, development and operation of global mining and infrastructure related opportunities. Todd Minerals key projects include the Balla Balla rail and port infrastructure project in Western Australia, the Hemerdon tungsten mine in the U.K. and the Sisson molybdenum and tungsten project in Canada.
That being said, he was there for 2 years only and I don't know if his experience will be relevant.
probably got an inflated opinion of himself from those projects and operations. An organization like Todd minerals probably has key people below Will Goodwins former position who'd know what was going on. Very much doubt whether super fund have those next level down people.
The objective of the superannuation fund is to replicate money, but the goal of infrastructure spending is arguably to enhance productivity, the latter being the domain of government spending. Rail often makes a negative return, which is fine if it’s on the government’s books. There’s a mismatch in objectives here. Same with ESG funds. For goodness sake stick to the mission.
No no no no. More management on high salaries and a significant change is the risk profile of their (i.e. OUR) portfolio.
Cullen should have just set up the superfund as a passive investment in a vanguard global ETF. Zero overhead expenses and insulation from the MBAs with more interest in padding their portfolios and empire building than the common good.
The Super fund is an exercise in futility when we have a sovereign currency issuing government. Money is not the issue in supporting an aging population but having the economic resources is. Alan Greenspan tells us as much here. https://www.youtube.com/watch?v=DNCZHAQnfGU
This is an ill-conceived idea, put forward by an organisation that is fooling itself.
Example 1 - “ Goodwin was confident the Super Fund's mandate to maximise investment returns wouldn't pose a conflict of interest or compromise good outcomes for public infrastructure.” Yeah, right.
Example 2 - “ Goodwin noted using private capital also frees up public finances.” This is a myth. Our government is a currency issuer, a fundamental fact that the Super Fund has not grasped yet.
This proposal is just a continuation of the failed neoliberal agenda.
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