New Zealand SWF Axes Eight Private Equity Funds

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 Allocation NZ 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.

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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 CIOin September 2015. One month later, the fund unloaded $3 billion in real estate to Blackstone.

Eric Varvel_1 Eric Varvel, Credit SuisseCredit Suisse has announced a new leader for its global asset management business.

Eric Varvel—former co-head of investment banking and current chairman of the emerging markets and sovereign wealth funds—will replace Bob Jain effective June 1, the firm announced yesterday. Jain is reported to be leaving the Swiss bank to join billionaire Izzy Englander’s hedge fund Millennium Management as co-CIO.

As the new global head of asset management, Varvel will report to Iqbal Kahn, CEO of the international wealth management division. He will be based in New York, with frequent travel to Switzerland and “various emerging markets, including in the Asia-Pacific region,” Credit Suisse said.

“We are confident that [Varvel’s] global experience, track record, and expertise will significantly contribute to the further development of our asset management franchise and to the achievement of our ambitious goals,” Khan said in a statement.

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The CEO also praised Varvel’s “strong relationships with many strategic clients” in the hopes of benefiting the bank’s asset management business.

According to the announcement, Varvel will be tasked with growing Credit Suisse’s alternatives investments initiative, strengthening the bank’s position in Switzerland, and developing the business in emerging markets and Europe.

Varvel has spent more than 25 years at Credit Suisse, during which he served as a member of the executive board (2008 to 2014) and CEO of the investment bank as well as of the Asia Pacific, Europe, Middle East, and Africa regions.

Last October, Credit Suisse’s new Chief Executive Tidjane Thiam announced an overhaul of the bank, including plans to raise $6.3 billion in new capital as well as reducing its investment business to redeploy resources to its wealth management unit.

The firm also announced Tuesday it had posted a CHF 302 million ($309 million) loss for the first quarter in 2016 despite achieving “significant cost savings across the bank.” Thiam said difficult markets conditions during the period led to such losses.

“We remain convinced that we face attractive long-term opportunities in our wealth management-focused divisions, supported by investment banking capabilities, and that our strategy will, over time, create value for our clients and shareholders,” he concluded.