Tuesday 1st March 2016
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The New Zealand Superannuation Fund has signed up US-based investment management business Ramius LLC to manage a US$200 million mandate to buy and sell shares on both sides of a merger, known as merger arbitrage.
The mandate is effective from today, and will focus on mergers and acquisitions in listed companies from North America and Europe, the Super Fund said in a statement.
Ramius LLC manages US$13.8 billion in assets, and is owned by Cowen Group. Its strategy for merger arbitrage is focused on liquid, fundamental research-driven merger arbitrage investments in multiple types of securities, it said.
The mandate is the Super Fund's first investment in merger arbitrage, and comes at a time when investors are preparing for increased M&A activity after several years of strong gains on listed equity markets.
Super Fund chief investment officer Matt Whineray said the strategy is designed to achieve a premium return over the long term, and the fund's "long investment horizon" means it is in a good position to take advantage of the returns offered by merger arbitrage.
In January, chief executive of the fund Adrian Orr said recent sharp swings in equity markets around the globe offered buying opportunities, and enabled long-term investors like the super fund to pick up assets more cheaply.
The fund returned 15 percent after costs and before tax in 2015, beating its passive Reference Portfolio benchmark by 4.45 percent and marking its third-strongest value-add performance in 12 years. Since inception the fund has returned 9.3 percent per annum. It managed $28.3 billion as of Jan. 31.
In December 2015, the 2016 budget policy statement revealed government contributions to the fund were projected to resume in 2022/23, two years later than previously indicated. Contributions were suspended in June 2009. The government is expected to start withdrawing money from the fund in around 2031/32 to begin to help pay superannuation and the size of the fund is expected to peak in the 2080s.
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