By ELLEN READ
Infrastructure Auckland's decision to redeploy $350 million of investments is a political move rather than a financially significant one.
Infrastructure Auckland (IA) is repatriating $270 million of overseas investments and cashing in $80 million in New Zealand corporate bonds in favour of investing the money in New
Zealand Government stock and bank deposits.
As around $27 billion of Government bills and bonds are at present in the marketplace, the move will not unsettle local markets.
"It'll get completely lost in the wash in terms of the currency market or bond market," said Bank of New Zealand chief economist Tony Alexander.
The decision to reinvest the funds follows confusion over the interpretation of the legislation governing where IA can invest its money.
Until now, it has actively managed a cash and a diversified bond portfolio, investing cash overseas and in domestic corporate bonds.
This investment policy was based on legal advice about the interpretation of its legislative mandate - the Local Government Act.
But a recent Queen's Counsel opinion, sought by IA to resolve how and where it can invest its money, exposed a lack of clarity in its mandate, casting doubt on the legality of it making investments other than in New Zealand government stock and cash.
It will not invest in state-owned enterprises, crown health enterprises or local authorities.
IA has asked a parliamentary sub-committee to investigate and to re-word the act, allowing it to hold a diversified fixed-interest Treasury fund.
If Parliament finds in IA's favour, the $350 million being reinvested could be returned to its original investments.
Until then, said IA chairman John Robertson, it was better to act according to the narrowest definition of the act.
He said the present nature of IA's investments had added a 1 per cent premium to what would have been earned in domestic bank securities and government bonds.
The IA's international bond portfolio is managed by investment bank Goldman Sachs and the New Zealand corporate bonds by AMP.
Robertson said Infrastructure Auckland had a total of $550 million of liquid Treasury assets - with the $200 million balance already invested in government securities or held in cash in New Zealand.
IA was set up in 1998 to manage the $849 million in assets of the disbanded Auckland Regional Services Trust.
