Willis Nicola; Tuiono TeanauNEW ZEALAND SUPERANNUATION AND RETIREMENT INCOME (CONTROLLING INTERESTS) AMENDMENT BILLThird ReadingHon NICOLA WILLIS (Minister of Finance): I present a legislative statement on the New Zealand Superannuation and Retirement Income (Controlling Interests) Amendment Bill.DEPUTY SPEAKER: That legislative statement is published under the authority of the House and can be found on the Parliament website.Hon NICOLA WILLIS: I move That the New Zealand Superannuation and Retirement Income (Controlling Interests) Amendment Bill be now read a third time.The Government recognises that the New Zealand super fund was put in place to ensure maximum returns over the long run to support the payment of New Zealand superannuation into the future. We also recognise that the guardians of the super fund must continue to manage the fund in a manner consistent with best-practice portfolio management and independent from political direction by Government of the day.This bill therefore must strike a careful balance. We want to ensure that the New Zealand super fund is there to support future New Zealanders while at the same time ensuring the guardians have the right tools to maximise the fund's returns.The New Zealand super fund prohibition from taking controlling interests in companies formed has been in place since establishment. Part of the rationale for this at the time of establishment was that the size and the maturity of the fund at the time and the relatively small exposure to direct investments within global practice investment management back in 2001. I think it is also the case that it reflected concern from many about the potential for the super fund to become a politicised vehicle for investment. Today the fund has matured and I would reflect over successive Governments has demonstrated its independence and we see a different story now. The guardians' governance has evolved to provide effective oversight of complex investment strategy and at the same time direct investment globally is now a much more common feature of best-practice portfolio management and the New Zealand super fund is now considered a mature fund. In this new environment and this changed context a prohibition on taking controlling interests in companies is no longer needed; it is obsolete—and that is why this bill is in the House.The bill removes the prohibition on the New Zealand super fund taking a controlling interest in companies. This will ensure that the guardians in future have the tools to manage direct investment and therefore the ability to seek out a much wider range of investment opportunity including in New Zealand. We're also at the same time making a range of minor and technical changes that will ensure that where there is a controlling investment made by the New Zealand super fund it doesn't result in an entity being treated as though it is part of the Crown. This ensures the entities invested in are not subject to obligations that were designed for public sector organisations.I thank submitters and the select committee for their valuable time and discussion on the bill and members in the House for what I think has been a useful debate. I'm assured by the process we have conducted that the bill best reflects the Government's policy intent and the realities of investment for sovereign wealth funds. I will thank the previous Government for introducing the bill and I'm pleased to see our Government support the bill through its remaining time in the House.I would reflect that a sentiment shared across those who have been speaking to the bill—I think it would be fair to reflect—is to see the New Zealand super fund capable of investing more of its resources in New Zealand where that is consistent with its statutory purpose of providing commercial and prudent return. It has been the observation of many of the contributions to this debate that by allowing the super fund to take a controlling interest a much wider array of potential investments is opened up and that it also will allow the super fund in some cases to become a more active investor.I'd like to reiterate my thanks to the Finance and Expenditure Committee for the efficient and effective deliberation of the bill and to the submitters who provided valuable insights and supported the committee in forming a view on the bill. I entered the first reading of this bill with some concern about the potential for this to lead to less independence for the fund and the potential to have impact on competition with other market investors in New Zealand. I'm satisfied from our deliberations that the bill will have limited impact on competition with other market investors due to the size and scale of the fund's direct investments and that the existing measures which exist in the super Act will preclude the kind of inappropriate influence that we have discussed.The amendment positively should also provide a larger opportunity set for New Zealand investments—as I said earlier—and potential to increase the risk-adjusted return of the fund. This bill could well have the effect of both furthering that commercial purpose while also serving a wider New Zealand Inc" objective. We can see potential that the super fund could in future for example take a controlling interest in a piece of nation-building infrastructure and I think that that is a prospect that would excite many in the House.In addition I note that the bill does not alter the guardians' independence from political influence in relation to investment decisions. It requires the board of the guardians to include in the statement of investment policies standards and procedures the details of a governance framework for the implementation and operation of controlled entities. As I noted in the committee of the whole House stage of the bill I have been satisfied that the guardians are well advanced in their thinking about how they will adopt these practices upon the passage of the Act.The bill also provides for the amendments contained within it to be reviewed within 10 years as part of the regular five-yearly statutory reviews of the fund and I think it is a sign of the maturing nature of the fund—and actually of New Zealand's investment context—that we have seen this adaptation occur and it is not impossible to envisage that future tweaks could be made again in future.So to conclude our Government recognises the role of the New Zealand super fund in providing long-term security to future generations of New Zealand superannuitants. We think it is important that where the fund is a custodian of New Zealand taxpayer funds that it invests those funds wisely. We think it is not wise for the fund to be artificially precluded from making good commercial investments in New Zealand entities where it either intentionally or unintentionally comes to have a controlling interest. This bill allows a wider tool kit to execute investments a larger opportunity set for New Zealand investments and it provides the potential to increase the risk-adjusted return of the fund. These changes have the potential to create positive benefit for all New Zealanders.The bill is consistent with the guardians' mandate to invest the fund on a prudent commercial basis and in doing so manage it in a manner consistent with best-practice portfolio management. This bill is very much in step with developments we have seen with similar funds in other parts of the world and is consistent with developments in the way that funds of this sort are investing. I commend this bill to the House.ASSISTANT SPEAKER (Teanau Tuiono): The question is that the motion be agreed to."