New Zealand SWF Axes Eight Private Equity Funds

CalPERS isn’t the only asset owner culling its roster on a mission to simplify.

The New Zealand Superannuation Fund has cut most of its ties with non-specialist private equity funds based outside the country. 

Sales of eight fund stakes closed in the last three weeks, according to the NZ$30 billion ($20 billion) sovereign wealth investor. 

“These were relatively small investments,” said Fiona Mackenzie, NZ Super’s head of investments, in statement released Tuesday. “The move to sell them is consistent with our strategy to have fewer, deeper relationships with our investment managers.”

NZ Super Asset AllocationNZ Super’s portfolio as of March 31, 2016 Partners Group, a private-asset management firm, and its affiliates picked up a portfolio of five real estate investments: Orion European Real Estate Fund III, Mountgrange Real Estate Opportunity Fund, MoREOF (Parallel I) Unit Trust, Red Fort India Real Estate Fund II, and Gateway Capital Real Estate Fund III.

Only two offshore firms—Savanna Real Estate and Sweden’s Sveafastigheter—now have property mandates from NZ Super. 

The sovereign fund unloaded three private equity investments to an undisclosed buyer last month, including Hellman & Friedman VII, JMI Equity Fund VII, and HIG Bayside Loan Opportunities Fund II. 

“It is pleasing to be able to realise gains from a part of the fund’s portfolio that has performed strongly in recent years,” Mackenzie said at time of closing. 

Private equity accounted for 5% of NZ Super’s portfolio as of March 31, an aggressive underweight by global institutional standards. 

The California Public Employees’ Retirement System (CalPERS), for example, recently set a 10% strategic target for private equity, along with an additional 12% to real assets and 10% to real estate. 

CalPERS and NZ Super have shared the same critique of their unlisted portfolios, however: An excess of relationships for undersized mandates. 

“It’s harder to end strategies than begin them,” CalPERS’ investment chief Ted Eliopoulos told  CIO in September 2015. One month later, the fund unloaded $3 billion in real estate to Blackstone. 

Related: CalPERS Sells Off $3B in Real Estate & An SWF’s SWF