Darby estimated the council had been missing out on a million dollars a day since June by not being diversified and invested in international equities markets such as the Nasdaq, Dow Jones and Financial Times Stock Exchange, as the Future Fund was designed to do.
“It’s now eight months since council sold its second tranche of the airport shares. The Auckland Future Fund chair confirmed that the proceeds are largely in deposits at low interest rates,” Darby said during the July 31 Auckland Council Governing Body meeting.
“This second tranche was sold a long time ago and we’re going backwards in my analysis at about a million dollars a day by it not being invested. We talk about a lot of small issues here. I’m talking about a big issue – $1.34b. And I don’t think the transparency [has been adequate]… It’s not about road cones or potholes.”
Wilson said in the meeting he was also conscious of the ongoing delays to the investment manager appointment.
“I obviously share your concern about the stewardship of that very significant fund. I’ve been assured that the board is working on it,” he said.
In September 2024, the council appointed a three-person board of investment professionals to manage the fund: chairman Chris Swasbrook, Craig Stobo and David Callanan.
Swasbrook indicated in a June 4 memo to the Auckland Mayor and councillors that the Future Fund board had a shortlist of four possible candidates and would announce the global investment manager by the end of June.
During Darby’s questioning of the chief executive, liaison councillor for the Future Fund, Christine Fletcher, chimed in to offer an update on the appointment.
“I can assure you that it’s the decision of the chair of Auckland Future Fund but a decision should be coming out today or tomorrow publicly,” Fletcher said in the July 31 meeting.
More than two weeks later, there has still been no announcement on a manager to oversee international investment of the $1.3b fund.
Darby was at a loss when Fletcher offered this information.
“Look, it’s really irregular for a councillor to have that information and I don’t think you have it, chief executive. I certainly don’t have it,” Darby said.
“We’ve got to do better on this. We need to understand this better. There needs to be more timely information. If this is the Auckland Future Fund going forward, it is not good enough.”
In response to a question about the delays, Swasbrook referred the Herald to an August 1 memo he sent to the Auckland Mayor and councillors as a “progress update”.
Swasbrook indicated the board had made a decision on a “preferred supplier” as an investment manager and negotiations with them were ongoing.
“These contract negotiations are progressing well. However, a significant, high-value, long-term contract requires extensive due diligence and careful attention to the many details,” Swasbrook said.
“This involves critical elements such as legal contract negotiation, reference checks, finalisation of fees, compliance tasks, etc. Please be reassured that we will make an announcement as soon as this work is completed.”
In his June 4 memo, Swasbrook also outlined the intricate financial status of the fund, which at that time, was worth $1.343b.
Swasbrook said that if the council had retained the Auckland International Airport shares, their value would currently be approximately $1.224b.
But if the funds had been invested in “diversified global equity holdings” from December 9, 2024, the value would be approximately $1.337b.
So having the funds during that period in interest-earning bank accounts has been beneficial, he said.
“We have protected the Auckland Future Fund in the short term by placing the funds in secure term deposits and interest-earning bank accounts,” Swasbrook writes.
“While the return on the funds is below the 7.24% long-term average net return, they exceed the return that would have been achieved in the market had the funds been diversified into worldwide investments earlier than is currently planned.”
Darby’s issue is that since June, markets around the globe have improved, and he said the council is losing millions of dollars of potential returns by not having the Future Fund invested in them.
“International equities markets have grown by about 3% in the month of June,” Darby said in a letter to Wilson on July 9.
“That’s a whopping $40 million the fund has left on the table. Putting it simply, every day that goes by without an investment manager in place, the cost to council and ratepayers is a minimum $1m.
“I am seriously concerned about the paucity of information unless I ask questions directly.”
Tom Dillane is an Auckland-based journalist covering local government and crime as well as sports investigations. He joined the Herald in 2018 and is a duty editor and senior reporter.
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