The money has been “conservatively” assumed lost after Banco Espirito Santo failed. Its president was arrested as part of a criminal investigation.

The New Zealand Superannuation Fund returned 1.17% ($240 million) in January 2015, ending the month at $27.78 billion - a record high for a month end return (after NZ tax, before costs).

For the financial year to date, the Fund has returned 7.88% or $1.82 billion

Chief Executive Officer Adrian Orr said: “I am particularly pleased to be able to report that the Fund grew by $240 million in January, despite the challenges we face with the Bank of Portugal.”

The US$150 million Oak Finance loan was made in July.

When Banco Espírito Santo failed a month later, the Oak Finance loan was placed in a successor bank, Novo Banco, that kept the collapsed lender’s good assets.

In December, the loan was moved by the Bank of Portugal to the “bad bank” of the lender, which holds assets to be liquidated.

The NZ Super Fund is part of a group including Goldman Sachs, which arranged the loan, suing the Central Bank of Portugal over their loans being excluded from the bank’s bailout.

Orr said the Bank of Portugal’s decision, which was based on a view that investment bank Goldman Sachs was both an associate of Banco Espírito Santo and had in fact made the loan, was wrong.

“As Goldman Sachs has said publicly and to the Bank of Portugal, Oak Finance was an independent entity from Goldman Sachs International. We understand that at no point did Goldman Sachs hold a participatory interest in more than 2% of Banco Espírito Santo’s shares. Legally, the loan arranger’s shareholding in Banco Espírito Santo should not be the basis for treating the Oak Finance loan as related party lending.”

Orr said the Bank of Portugal’s decision was disappointing.

“We note that Novo Banco continues to have the benefit of the money that we lent. It will also be of considerable concern to any investor that the Bank of Portugal has not treated all senior debt holders equally."

He said: “In making this loan, the Fund was providing liquidity to the Portuguese banking system.  The Fund was protected against the risk of Banco Espírito Santo defaulting through the purchase of credit insurance. This is a very standard, insured, investment activity globally that keeps the financial world liquid. The Bank of Portugal’s actions, however, in treating the Oak Finance loan differently to all other senior debt obligations, appear to have had the effect of negating this insurance.”

Orr said the matter was likely to take  time to resolve. “We are not entering into these legal proceedings lightly and have made the decision only after exhausting all other options.”

While the Oak Finance investment is significant in dollar terms, it represents a small proportion of the overall $27 billion New Zealand Superannuation Fund, which was established by New Zealand Government to partially pre-fund universal retirement benefits.