Crown financial institutions hold a 15.6% stake in gumboot
maker Skellerup Holdings. Photo supplied.
Investment options for the Crown financial institutions
in publicly-listed New Zealand companies are close to
saturation point and the institutions may look for private
market opportunities in which to invest.
The Treasury's Crown Ownership Monitoring Unit report shows
that Crown financial institutions (CFI) have shareholdings in
96 of New Zealand's 150 listed companies.
The CFIs include ACC, the Government Superannuation Fund, the
National Provident Fund and the National Superannuation Fund.
At June last year, there were 47 listed companies where the
combined shareholding by the CFIs across the portfolio
exceeded 5% of issued capital - excluding Air New Zealand
where the Crown holds a non-traded majority holding of the
shares on issue.
Of those 47 companies, there were 17 where the combined
holding exceeded 10%. Only two individual CFI holdings
exceeded 10% at the end of June.
Crown Ownership Monitoring Unit deputy secretary Andrew
Turner said that at the end of the period, the CFI portfolio
held invested assets totalling $47.2 billion. That included
The institutions invested across domestic and international
markets to try to achieve their respective investment
The market capitalisation of the New Zealand listed equity
market - the NZX - was about $60 billion, of which only $40
billion was freely traded.
''Comparing this to the funds under management across the CFI
portfolio means there is limited scope to invest a
significant proportion of CFI assets in the NZX,'' he said.
''In light of this, if the CFIs look to extend investment in
the domestic market, they will have to look for appropriate
private market opportunities in which to invest or consider
investing on a more passive basis.''
The unit did not regard the current level of aggregate CFI
holdings in the NZX, or the total dollar exposure, as
excessive, Mr Turner said.
However, there was a limit to the scale of assets that could
be invested in NZX-listed companies, especially where CFIs
were seeking to add value through active management, as each
of them looked to do at present.
Craigs Investment Partners broker Chris Timms said the
investment by the CFIs demonstrated the ''smallishness'' of
the domestic listed market.
Brokers took it as positive the institutions were prepared to
support New Zealand companies but they would be careful not
to over-expose themselves to the companies.
''Normally, a large holder in a stock will always cause
concern if they are not there for the right reasons. But the
institutions are not short-term players and are not wanting
to move the price around a lot.''
Selling out of a company could cause problems. The
institutions owned 15.6% of Skellerup Holdings, he said. If
they decided to exit the stock, they had the ability to move
the market considerably.
''It is good for the institutions to be invested in local
companies but as the market is reasonably small, it will
always be an issue,'' Mr Timms said.
Mr Turner noted that the Crown's portfolio of commercial and
financial investments made a modest return in the year to
June 2012, in the context of uncertain business environments.
For the Crown financial institutions, strong gains from
fixed-interest securities offset poor equity market
performance so that overall, they made modest returns. The
funds performed well relative to benchmarks, indicating that
active investment strategies had been added.
In the commercial priority group of companies, total
shareholder return and dividend yield were both lower than in
2011, he said.
In addition to the challenging business conditions, the
unfavourable hydrological conditions also adversely affected
portfolio performances, because the portfolio had a large
weighting to energy sector companies.
''Given the tight fiscal position that New Zealand faces in
the context of ongoing challenges in the economic
environment, efficient and effective balance sheet management
is critical. That ability of commercially-focused companies
and the CFIs to create value and then, where appropriate,
make that available for Government priorities is more
important than ever,'' Mr Turner said.