GSF performance - You be the judge

The Government Superannuation Fund presents a report on its performance.

Monday, October 14th 2002, 6:26PM

The Government Superannuation Fund (GSF) has reported an after tax investment loss of $76 million for the year to June 30, 2002 according to the fund's annual report tabled in Parliament.

This was the first report of by the new GSF Authority which was appointed to manage the Fund GSF in October last year.

The after tax loss represents 2.3% of the fund's GSF's $3.25 billion assets, which part-fund the Government's superannuation obligations to its retired and some current Government employees.

The 2.3% deficit compares favourably with the 4.1% after tax deficit of the median superannuation scheme in the Watson Wyatt Investment Performance Survey of 109 schemes for the same period.

Pre-tax there was an overall GSF investment gain of 0.5% for the year, and a minus 2.6% return since October 2, 2001.

The negative return was due mainly to the collapse in the international equity markets in the June 2002 quarter. The fund's unrealised pre- tax loss in that quarter for international equities was $164 million.

Pre -tax there was an overall investment gain for GSF of $0.5m for the year.

Authority chairman, Basil Logan said the rebalancing of the fund's GSF's assets from entirely New Zealand fixed interest to those consistent with best practice investment portfolio management was almost halfway through.

The transition would continue, and would be completed by the end of the next financial year.

Mr Logan said, "the better returns expected over the long term from the change to a diversified in asset allocation portfolio will contribute more towards the GSF super obligations, and as a result save taxpayers, who make up the annual shortfall a significant annual contribution towards the payment of GSF benefits," Logan says.

Logan added that benefit entitlements are not impacted by investment returns..

In his the report Logan said the management of the fund's assets and schemes had been successfully transferred from the Ministry of Economic Development to the GSF Authority.

An internationally recognised investment advisory company had been appointed and asset allocations established, with the investments being managed by seven specialist management companies.

The authority's board considers the policies they GSF operates under are sound and take into account the long-term obligations of the GSF, and an appropriate balance between risk and return.

"With the turbulence in the international markets it is possible there will be some further paper losses in the future. Returns over short time periods will continue to be volatile with some further unrealised losses possible" Logan said.

"The authority remains confident it will achieve its long-term objective of outperforming an equivalent portfolio invested almost entirely in New Zealand Government Stock," he added.

The fund has obligations to its members for up to 60 years and was closed to new entrants in 1992.

GOVERNMENT SUPERANNUATION FUND – KEY DATA

$m	1/07/01 – 30/06/02		1/04/02 - 30/06/02		2/10/01 – 30/06/02
	$m	%	$m	%	$m	%
Total Assets Beginning	3495		3472		3531
End	3287		3287		3287
Change	(208)		(185)		(244)

Breakdown of Change - Membership	(132)		(31)		(97)
- Investment (Post Tax)	(76)	-2.3	(154)	-4.4	(147)	-4.2
- Total	(208)		(185)		(244)

Pre Tax Investment Return	0.5	-	(125)	-3.6	(105)	-2.6

International Equities
Pre Tax Investment Return	(186)		(164)		(186)

Asset Allocation June 30

	Actual as at 30 June 2002		Long Term Target
	$000	%	%
NZ fixed interest and cash	1,935,625	59.5	14.0
NZ equities	236,464	7.3	12.5
International equities	1,080,856	33.2	52.5
International fixed interest	-	-	21.0
	3,252,945¹	100.0	100.0