Coronavirus Round-up: NZ Super takes €5bn hit but stays contrarian

The digest of the key investment news during the pandemic

The New Zealand Super Fund has reported a reduction of NZ$8.9bn (€4.8bn) – or 19.5% – in its net asset value since the start of the year amid the market turmoil. It stressed that its long-term performance since inception sits at 8.75% p.a. vs. 7.39% for its benchmark. It said it is well-placed to withstand market downturns and that its investment strategy is “designed with this in mind.” It uses “active, contrarian” strategies – “meaning we’re buying when other investors are selling and vice-versa”. The fund added that staff would mostly be working from home until further notice.

Swedish pension and insurance groups Länsförsäkringar and Folksam have put SEK300 (€27m) and SEK700 respectively into social bonds issued by the International Finance Corporation to support pandemic-hit firms. Länsförsäkringar said the bond issue was for a total of SEK3bn, and formed part of a $12bn commitment made by the World Bank at the start of the month.

During the outbreak, responsible investors can help encourage and validate responsible governance and leadership from the top, according to the EIRIS Foundation’s Peter Webster. “They can do this for the good of their own investments, for their beneficiaries and as responsible economic citizens. And while nobody can “solve” this crisis on their own, responsible investors have a part to play.”

Will the future for the global economy be v or u-shaped? That’s the question posed by Insight Investment in a note that explores how its active fixed income team is thinking about the impact of COVID-19 on economies and markets, including the impact of policy responses to it. It believes there are two key questions: 1) Whether and how the impact of COVID-19 might be mitigated and 2) Whether its impact will lead to increased unemployment – taking into account the effects of monetary and fiscal policy.

Amid the outbreak, ask yourselves some important strategic questions and possibly “review your asset allocation policy”. These are among five questions non-profit investors should ask themselves, according to Timothy Yates, President & CEO of Commonfund Asset Management. Commonfund, chaired by Bob Litterman, manages $25.6bn for US institutions.

The Universities Superannuation Scheme (USS), the UK educational fund, has reportedly breached one of its funding measures as a result of the pandemic market turmoil. IPE reported that USS, on a member webpage, says it is “looking at a short-term response” which could include raising employer contributions and/or supporting employers to cut liabilities.

Merseyside Pension Fund in the UK has told members that they can “be assured that both their contributions and their pension, whether in payment or built up to date, will be unaffected”. It said Local Government Pension Scheme (LGPS) defined benefit pensions are not linked to stock market performance and are set out in statute. “Although short term investment values may vary, the LGPS as a long-term investor is securely managed to address any longer term impacts.”

The outbreak is forcing people to use tools that can help to cut business travel, which could benefit the climate, according to a note from Simon Webber, Lead Portfolio Manager, Global Equities, at Schroders. He said that, for many services businesses, business travel-related emissions are the largest source of their carbon footprint. “If the airline industry is unable to find an alternative propulsion technology to jet engines, the only way for businesses to reduce travel-related emissions is to travel less,” he wrote.

Dutch pension asset manager APG has disclosed a 5.04% stake in New York-listed industrial group MSA Safety Inc., which makes – amongst other things – oxygen breathing apparatus and respirators.

There have been “deeply predatory” actions from companies during the crisis, according to pressure group the Australasian Centre for Corporate Responsibility (ACCR). In a blog, Executive Director Brynn O’Brien wrote: “While we have seen some examples of responsible company behaviour in the past couple of weeks, we have also seen deeply predatory and cynical corporate and political activity.  When everyone’s attention is on the coronavirus, it is clear that some see this as an opportunity to push their least palatable plans through.”