NSW Government has merged six funds into one $47 billion fund, which TCorp will continue to manage.
New South Wales (NSW) Government has merged six funds into one to create a new $47 billion fund with the name: OneFund. The government expects the merger will enable higher investment returns for each of the funds, as well as deliver operational efficiencies.
The merger includes the Debt Retirement Fund, NSW Infrastructure Future Fund, Social and Affordable Housing Fund, Snowy Hydro legacy Fund, Treasury Managed Fund and Long Service Corporation funds.
TCorp, the investment management arm of the state government, will continue to manage the merged fund.
TCorp Chief Investment Officer Stewart Brentnall welcomed the decision and said it would remove investment constraints for some of the funds.
“We support the NSW Government’s decision to combine the funds which will provide an opportunity to optimise the state’s balance sheet to generate higher returns over the long term,” Brentnall said.
Under the OneFund approach, the funds will benefit from pooling under one new cost-effective structure and from the removal of portfolio investment constraints. This will enable higher returns for each of the funds over the long term, through more efficient use of risk
“Under the OneFund approach, the funds will benefit from pooling under one new cost-effective structure and from the removal of portfolio investment constraints. This will enable higher returns for each of the funds over the long term, through more efficient use of risk.
“Importantly, we believe this new combined structure achieves 5 important outcomes. It will reduce concentration, liquidity and asset specific risks, minimise the prospect of selling assets during a period of negative returns, and enable economies of scale in the management of assets,” he said.
OneFund will be targeting an investment return objective of CPI +4.5 per cent per annum over rolling 10-year periods, which is consistent with the state’s long-term investment horizon and risk appetite.
To achieve the investment return objective, OneFund will deploy a moderate increase in risk across the individual funds but will remain well within the NSW Government’s risk appetite, TCorp stated.
The new structure will become effective as of 31 August 2024.
__________
[i3] Insights is the official educational bulletin of the Investment Innovation Institute [i3]. It covers major trends and innovations in institutional investing, providing independent and thought-provoking content about pension funds, insurance companies and sovereign wealth funds across the globe.