The NZ$30 billion ($20.1 billion) New Zealand Superannuation Fund hired Northern Trust Asset Management to manage a Barclays Global Aggregate fixed-income portfolio incorporating the Auckland-based fund's environmental, social and governance exclusions.
Spokeswomen for both New Zealand Super and Northern Trust declined to provide details on the size of the allocation.
Catherine Etheredge, a spokeswoman for New Zealand Super, said in a telephone interview the move to boost the fund's passive exposure via ownership of the underlying shares rather than derivatives is in line with recent pricing trends that have left physical ownership the more cost-effective option for now.
The latest allocation extends a relationship that began in October 2013, when New Zealand Super hired Northern Trust to manage four passive equity strategies: global large cap, global small cap, emerging markets and developed markets REITs.
In a news release Tuesday, Matt Whineray, New Zealand Super's chief investment officer, called the latest appointment “consistent with our desire to have fewer, deeper manager relationships, helping us manage the fund's portfolio as efficiently as possible.”
Ms. Etheredge said at the broadest level, the only constraint on New Zealand Super's relationship with any single manager is that no external manager should oversee more than 25% of the fund's portfolio. As of June 30, 2014, the latest date for which external manager data are available, Northern Trust was overseeing 4.9% of the fund's assets, well below State Street Global Advisor's 18.5% and BlackRock's 10%.
Camilla Greene, a Northern Trust spokeswoman, called ESG-related bond mandates a small but growing piece of the company's business. Northern Trust doesn't publicly break out its ESG-related assets, Ms. Greene said.