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NZ Super Fund looks to offload North Island forests; Kaingaroa talks stall

Wednesday 17th October 2012

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The New Zealand Superannuation Fund, which was set up to pre-fund baby boomers' pension liabilities, is in talks to sell a group of North Island forests, though negotiations to buy-out Harvard University's endowment fund stake in the Central North Island Kaingaroa forest have stalled.

The Cullen Fund, so-called for its architect former Finance Minister Michael Cullen, had 11 forest estates valued at some $91.1 million available for sale as at June 30, according to its annual report. The fund sought offers for land, forest crop and carbon credits in April and received bids in May, it said.

"As at 30 June, 2012, due diligence was being conducted by a selection of parties invited to do so at the discretion of the group," the report said. "If an acceptable agreement is achieved, it is anticipated that settlement will occur at some yet-to-be-determined date and will be dependent upon any regulatory approvals that may be required."

Timber investments made up 6.9 percent of the fund's $19.67 billion of assets as at Aug. 31, the bulk of which comes from its 40 percent share of the Kaingaroa forest estate.

The NZ Super Fund said discussions with Harvard's endowment fund to take full control of the Kaingaroa investment in a deal involving GMO Renewable Resources haven't progressed after the parties failed to reach agreement.

Kaingaroa has consistently been one of the Cullen Fund's best-performing assets, making an average annual return of 18 percent. The investment was valued at some $954 million as at June 30.

The fund topped $20 billion in assets under management in September, having started in 2003. The fund has made an annual return of 7.57 percent since it was set up, 2.41 percent ahead of Treasury bill rates and just short of its 2.5 percent per annum target over bills.

The Cullen Fund has increased its exposure to New Zealand assets, which account for almost 23 percent of the fund, up from 21 percent a year earlier.

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