New Zealand’s pension fund chief Adrian Orr and Finance Minister Bill English have some tricky questions to answer as the country’s Superannuation Fund has lost the equivalent of €130 million in the Banco Espírito Santo collapse.
The ‘risk-free’ investment through Oak Finance and organised by Goldman Sachs was rendered worthless just weeks after the public money was deposited.
Adrian Orr, Chief Executive of New Zealand's Superannuation Fund confirmed that legal action was inevitable and that in the fund's accounts the entire investment had been written off as a "conservative" measure.
The Superannuation fund was set up with New Zealand taxpayers’ money partly to cover the predicted shortfall in pension provision for the country’s Baby Boomers.
Shortly after the money was transferred to Oak Finance it was added to other participants’ money taking the total invested in BES to €835 million.
BES collapsed in August 2014 and chief executive Ricardo Salgado was arrested and bailed on a €3 million surety.
Goldman Sachs which organised the deal, yesterday said it is to "pursue all appropriate legal remedies without delay" to recover the loan to BES as the Bank of Portugal had gone back on its assurance that the investment was safely to be moved to the refinanced Novo Banco.
Goldman Sachs bosses were left reeling when the central bank’s governor, Carlos Costa informed the media of his U-turn just after Christmas last year.
The New Zealand minister responsible for the Superannuation Fund, Bill English, has yet to answer opposition requests for clarification but it is known that the investment was insured, but later this insurance was invalidated.
The NZ Green Party’s Russel Norman said the minister should be demanding answers from the fund managers as to "why they gambled US$150 million in this case, and why it's come unstuck".
"For a fund operating on behalf of the New Zealand taxpayer, taking these high-risk investments is probably not appropriate."
Adrian Orr denied that the investment was a high-risk one and said the Superannuation Fund was insured but that a retrospective rule change in Portugal had resulted in the insurance becoming void.
As part of a broader strategy, the New Zealand Superannuation Fund’s managers are a cautious bunch and only invest in banks where they received more in interest than it costs to insure the investment.
When the fund invested in Oak Finance and thus in BES, the Portuguese high street lender was Portugal's largest commercial listed bank and had just raised €1 billion in a June 2014 share issue - all looked well.
The Bank of Portugal stated before and after that BES was a solid bank and a sound investment when knowing all along that the troubles in the Espírito Santo Group were so severe that BES was affected and was highly likely to be insolvent.
While the Bank of Portugal stepped in to manage the collapse of BES it made sure that the Oak Finance money remained outside the country’s insolvency rules so the money was not transferred to 'good bank' Novo Banco and is unlikely in the extreme ever to be recovered.
Carlos Costa's U-turn is having international repercussions. Having Goldman Sachs and thousands of BES shareholders as oppponents in court is bad enough but now a sovereign pension fund... Costa's position is not a strong one and his strategy simply of blaming the Portuguese stock market regulator CMVM for this mess is not the action of a man who is up to the job.
