NZ Super Fund, Ontario Teachers’ Buy Australian Pathology Firm

The New Zealand Superannuation Fund and the Ontario Teachers’ Pension Plan (OTPP) Board bought a pathology business this month in a $362 million sale. This marks a major pension push into the health industry, with a company that is at the center of the fight against the coronavirus.

The pension funds will each take a 50% stake in Asia Pacific Healthcare Group (APHG), the largest New Zealand pathology business under Healthscope, Australia’s largest private health care operator, according to a release.

APHG, which provides services to three-quarters of New Zealand’s population, has been “heavily involved” in the country’s coronavirus response, according to the release. New Zealand has been praised for its handling of the pandemic, though it reported four new COVID-19 cases this week after more than three months without one.

“Never has the value of excellent health care and pathology services been more apparent than in the ongoing COVID-19 crisis,” NZ Super Fund Chief Investment Officer Stephen Gilmore said in a statement.

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news. 

“We’re pleased to return this asset to part local ownership and continue our strong investment into New Zealand,” Gilmore continued. About NZ$6 billion of the NZ$46 billion fund, or US$4 billion of the US$30.3 billion, is invested locally.

Healthscope, which started searching for prospective buyers at the start of the year, said the sale is consistent with its “long-term strategic refocus” on its hospital divisions in Australia.

For Ontario Teachers, the acquisition is in line with other recent health care investments the C$207.4 billion fund has made. About 11% of its C$39.3 billion, or US$29.7 billion, private equity portfolio is invested in health care. In 2019, the OTPP led a C$140 million, or US$106 million, fundraising round into Swedish digital health care provider KRY International that allows consumers to see doctors through their smartphones.

The transaction is expected to close by February 2021, pending approval from New Zealand’s Overseas Investment Office.

New Zealand Super’s Proxy Drive Against Big Tech Grows to 23 Institutions

Ontario Teachers’ Strikes Gold in Flexible Natural Resources Deal

Tags: New Zealand, New Zealand Superannuation Fund, Ontario, Ontario Teachers' Pension Plan, OTPP, Pension

The US Treasury Department has denied applications for a reduction in benefits for the American Federation of Musicians and Employers’ Pension Fund and the Teamsters Local 807 Labor-Management Pension Fund in Long Island City, New York. The rejections are the first during Treasury Secretary Steven Mnuchin’s tenure.

The Treasury said it nixed the Musicians pension’s proposal under the Multiemployer Pension Reform Act (MPRA) because the mortality rate and new entrant assumptions it uses “are not reasonable under the standards in the regulations.” It said the mortality assumption used by the pension in its recovery plan is based on a standard table that was used “without adequate justification or a demonstration of the manner in which the table properly reflects the mortality experience of the fund.”

Additionally, it said the fund’s actuary did not take into account relevant historic and current demographic data when selecting the standard table, which it said significantly overestimates the rate at which the plan’s participants and beneficiaries will die.

In response to the rejection, the pension’s trustees said in a letter to the plan’s participants that “we strongly disagree with Treasury staff’s conclusions” and that “Treasury was wrong to deny the application on this basis.” However, it added that “we are encouraged by the fact that Treasury staff advised us verbally that it had no issue with any other elements of our application or our proposed benefit reduction plan.”

For more stories like this, sign up for the CIO Alert newsletter. 

The pension’s trustees had been warned ahead of the official decision by Treasury staff that a recommendation had been made to deny the application and explained the reasons why. The trustees unsuccessfully lobbied Mnuchin to reject the recommendation and approve their application.

“A denial under these circumstances would be arbitrary and capricious, constitute a serious misapplication of administrative authority, and seriously threaten the plan’s viability,” the trustees said in a letter to Mnuchin. “Too much is at stake for this to be the basis of a denial.”

The pension fund supports more than 50,000 active workers, retirees, and beneficiaries, and receives contributions from more than 5,500 employers in the film, recording, symphonic, television, and theater industries. The trustees said they have already started working with their actuaries to prepare and file a second application for a reduction of benefits.

Under the rejected plan, more than 53%, or just over 27,000 participants, would have had no reduction of benefits, while just under 45%, or almost 23,000 participants, would have had their benefits reduced by as much as 19%. Less than 2%, or more than 900 participants, would have had their benefits reduced by between 20% and 40%.

Meanwhile, the Treasury said it rejected the Teamsters Local 807 Labor-Management Pension Fund’s application because the investment return assumptions used in its recovery plan were “not reasonable under the standards in the regulations.”

The Treasury balked at the pension’s use of an investment assumption that incrementally increases throughout the entire extended period to 2062. The assumed investment return for the first year of the extended period is 5.5%, and it rises to 8.1% by the end of the extended period.

“Given that the investment return assumption for the longer term of the extended period is overly optimistic,” wrote MPRA Director Danielle Norris in a letter to the plan’s trustees, “it is not reasonable to arrive at a determination that the proposed suspension is reasonably estimated to avoid insolvency.”

It was the Teamsters pension fund’s second application for a reduction of benefits. It first applied in June 2018, however, a snafu caused by a federal government shutdown in late 2018 and early 2019 caused the pension to reapply.

Under the Teamsters’ rejected pension preservation plan, any pensioner in pay status as of Nov. 1 would have had their benefits reduced by up to 49% as of that date. And the monthly pension benefit payments of any participant or beneficiary who enters into pay status after Nov. 1 would have been reduced by up to 49% for benefits earned through Oct. 31.