Scott Alastair: New Zealand Superannuation and Retirement Income Amendment Bill — Second ReadingText is incorporated into the Bound VolumeScott Alastair: New Zealand Superannuation and Retirement Income Amendment Bill — Second Reading[Sitting date: 07 May 2015. Volume:705;Page:3335. Text is incorporated into the Bound Volume.]ALASTAIR SCOTT (National—Wairarapa):Thank you for this opportunity to speak on this bill. I rise in support of this bill. Just to clarify a couple of things that were mentioned by Mr Lees-Galloway for his benefit the State does not manage the New Zealand Superannuation Fund. It never has and I hope it never will. The independence of this fund is paramount to the success of the fund. Twenty-nine billion dollars is a significant fund. It is well set up and we do not want even the slightest thought that Mr Lees-Galloway or Mr Robertson would participate in the decision making on the investments of that fund.We already heard that Mr Robertson wanted to invest more into the New Zealand Exchange or the New Zealand market. He even specified that he wanted to invest in small businesses. This is not doing a service to the New Zealand taxpayer. This is not doing a service even to those small businesses that he would like to support. We know that many small businesses fail and all he is asking is for the taxpayer to invest in a lot of failed businesses. It is just a statistic. We also know that overweighting an investment in any particular index increases the risk of the fund overall. We heard from Mr Bayly that 15 percent of the fund is invested in New Zealand and obviously that is significantly higher than the weighting of the New Zealand sharemarket across the global equity markets. So already we are supporting the New Zealand market by providing liquidity in that market.Getting to the point of the bill it is very important that we do manage the administrative side of this fund efficiently. A small percentage difference will make a significant difference to the return of the fund. My colleague Mr Ross suggested that there had been $30 million of opportunity lost because of the lack of this flexibility which the guardians are requesting. So this flexibility will allow the guardians to do some actions that they to date have not been able to participate in. For example they will be able to negotiate fee structures. They will be able to accumulate their investments approach an investment manager and negotiate hard for reduced fees.The location of the entity the fund investment vehicle is relevant because again they will potentially be setting it up in a different location to reduce costs. Of course if you have got an entity a fund investment vehicle you are able to limit the liability of that entity to the assets of that entity without recourse to the Superannuation Fund which would potentially be the case in some instances.This is restricted to passive investment opportunities—for example farms forests or a financial instrument that is not a business. And again the opportunity to save $30 million is there for the taxpayer to take advantage of because we know $30 million after 10 years will be $60 million—in fact it will take less than 10 years at the current rates of return on the fund.I would also like to turn to New Zealand First’s support of this bill which I appreciate. But I wonder whether that member Fletcher Tabuteau can see the irony in this support when the fund is mostly invested offshore. In other words this fund is a foreign investor in other people’s lands and of course that is exactly the policy that that party opposes for this country. It does not wish to see foreign investment in New Zealand yet it supports the Superannuation Fund which does exactly just that. It invests in other countries’ jurisdictions in other countries’ equity markets and in other countries’ financial markets.Hon Paul Goldsmith: You’re not saying they’re confused are you?ALASTAIR SCOTT: I think Minister they are confused and perhaps they may revise—I would be interested to hear from their next speaker whether they really do support this fund which does invest in foreign shores.Of course the fund investment vehicles are not going to change the restrictions that are already on the fund which restrict the investment to less than a controlling interest. That is a good thing because that forces the fund to diversify to not interfere—because it is a big fund—and diversification is important. Without the diversification we do not get the spread of risk and again I come back to the point made by Mr Robertson where he wants to overweight this fund in the New Zealand market overweight its investment into small businesses. The risk is of course that any index that one overweights their investment into loses money. I mean even the New Zealand market—over the last 20 years we have seen the likes of Telecom and Brierley’s completely disappear off the share market.So imagine if that was the case if Mr Robertson had been in charge of that fund invested in those companies because of his interest in that particular sector for whatever reason political or otherwise. It would be a disaster. Of course I have respect for Mr Robertson’s political ability but I would not want him to manage my money.Grant Robertson: Why?ALASTAIR SCOTT: I am giving him some credit but for investing my money—the taxpayers’ money—I would give him no credit whatsoever. Why would you want to give a penny to a politician of any sort?Of course coming to the Greens’ argument—Mr Norman’s suggestion again—trying to pick winners or trying to restrict the fund is a dangerous thing because we would have Mr Norman investing only in forestry I would assume and certainly not in any oil exploration or anything that involved anything to do with carbon fuel or anything that might make a dollar for and on behalf of the New Zealand taxpayer. So it is really important that we do not restrict the guardians of this Superannuation Fund. It is important that we give them the flexibility to independently invest given their level of expertise.We know that diversification across currencies across indexes across financial instruments is important because that manages the risk. We have seen the Portuguese bank—or is it a Spanish bank—that the fund is having trouble with. That is exactly why you need to diversify because although that is potentially an ugly end to an investment we know that it is only a very very very small portion of the fund. If we allow Mr Norman and Mr Robertson to get together and invest in the things that they like they will over-invest in things that would create an unbalanced dangerous highly risky investment for the taxpayer and on behalf of the taxpayer.So just to sum up—just to clarify for Mr Lees-Galloway’s benefit—the State is not managing the Superannuation Fund; the guardians are managing this $29 billion fund. It is significant. It is important that we keep politicians of every colour away from the fund. It is important that we leave the independence to those who are capable and experienced in managing the fund. This legislation allows an increased flexibility to the fund investment vehicles to decrease costs to save the taxpayer some dollars so that future generations are able to benefit from investments made today. Thank you.