The NZ Superannuation Fund should place more money in alternative assets and decrease its holdings in international shares, independent expert Jonathan Eriksen says.
"It's a big step. It's easy to say but the implementation will probably take years," he said yesterday.
He said some alternative assets were easy to placemoney in but others, such as infrastructure and private equity, would take longer.
One infrastructure investment Eriksen would like to see is a second Auckland Harbour bridge.
He said similar overseas funds had had success moving into alternative assets outside the usual portfolio of shares and bonds.
Asked if it might help the Government for the fund to be investing in much-needed infrastructure, Eriksen said: "I think it would [help] a lot. But they are not allowed to do that; they have to do it from a pure investment point of view and it has to stack up."
Some long-term investments were obvious good investments.
"I think it is easy. They should build the next [Auckland] harbour bridge," Eriksen said.
The suggestion to diversify the fund was contained in Eriksen's Government-commissioned independent report on the fund's first year. It says the performance of fund guardians is highly positive but cautions challenges lie ahead.
"I think they've done a superb job in the start-up phase but the point is now they've got some harder decisions to take," Eriksen said.
These surrounded refining where the fund placed its money and drawing up a list of back-up fund managers.
"Altering asset allocation - as opposed to making the initial investments - is much more complicated to manage and it's harder to know whether you've made the right decisions," Eriksen said.
The fund's annualised rate of return after fees for the nine months to June 30 was 10.4 per cent against a target of 7.8 per cent. The fund has 13 per cent of its money earmarked for alternative assets.
Eriksen thinks this should rise to up to 25 per cent.
The fund stands at more than $4 billion and is expected to grow to about $100 billion by 2020.
