NZ Super Fund to unveil new asset allocation

The $6 billion New Zealand Superannuation Fund plans to announce a new asset allocation strategy next week.

Friday, March 11th 2005, 11:38AM

While details of the new strategy are being kept under wraps it is likely that the fund, which invests money to help fund future costs of the state pension will start moving into some of the less liquid assets.

The areas it has been looking at include hedge funds, forestry, infrastructure, private equity and commodities.

Chief investment officer Paul Dyer says the fund is diversifying into these assets to enhance diversification and reduce risk.

He says asset allocation is an evolving thing and what the fund looks like now, or after these changes, is unlikely to resemble what it looks like further out into the future.

Dyer says the way the fund is made up at the moment it is mainly exposed to market risk. As time goes on the mix of market and active risk will probably change.

He told the Super Fund conference in Auckland yesterday that the fund has performed well in the past 16 months.

Its return up to January 31 was 11.92% which is well ahead of its target of 8.37%. (The target is the risk-free rate plus 2.5%).

While it was “quite a healthy excess return” it was still very early days and results needed to be judged over a longer time period to be “meaningful”.

Dyer said the fund is still small, compared to what it will grow to in future years, plus it has a very long-term investment horizon.

He says next week the fund is hosting, in Auckland, some of the international managers it uses. This is probably “the greatest collection of investment talent ever assembled in New Zealand,” he says.

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