Super Fund adds $4b

The NZ Super Fund finished the 2018 financial year at $39 billion, up $4b over the year.

Friday, September 28th 2018, 11:41AM

Government contributions resumed in December 2017 after an eight-year suspension.

Chair Catherine Savage said both broad markets and the NZ Super Fund had performed well during the year, with global equities rising in value and the NZ Super Fund beating its Reference Portfolio benchmark.

The fund returned 12.43% (after costs, before NZ tax), beating its passive reference portfolio market benchmark by 2.02% ($700 million). It exceeded the average return on Treasury Bills, its other benchmark, by 10.71% ($3.7 billion).

This year’s result brings the Fund’s returns since its inception in 2003 to 10.4% per annum.

Chief executive Matt Whineray said it had exceeded its reference portfolio benchmark for a number of reasons: : strategic tilting, in which the Fund’s exposure to different asset classes is adjusted over time; timber, primarily its 42% stake in Kaingaroa Timberlands; and an internally-managed credit mandate.

“These active investments (as with all of our active investment strategies) are designed to play out beyond annual cycles and are carefully chosen to take advantage of the fund’s endowments as an investor – our long-term horizon, known liquidity profile, sovereign status and operational independence. Tilting, timber and our internal credit mandate have consistently added value to the Fund over a number of years: pleasingly, the strong performances in 2017/18 are not one-offs.”

Whineray said that efficient implementation was also a factor in the fund’s strong performance and noted that the cost of managing the Fund, as a percentage of net assets, had declined to 0.28% compared to 0.35% in 2017 and 0.44% five years ago. “We continue to have a strong focus on cost control and ensuring we get value for money in all our investments and activities.”

He said global growth was likely to decelerate and inflation would rise in some developed markets over the near future.

“While the fund remains heavily weighted towards growth assets such as shares, with many markets at or above fair value, we have lowered the amount of active risk being taken. This is a measure of how different the Fund’s actual portfolio is from the passive reference portfolio – they have got closer during the year.

“We are also maintaining higher than normal levels of liquidity in the portfolio - assets that can be sold easily to meet our obligations or to fund new investments. This will ensure the Fund can withstand any future market stress and take advantage of new investment opportunities as they arise. We remain committed to our long-term investment strategies and will continue to take a highly disciplined approach to active investment.”

The government contributed $500 million over the financial year. Monthly contributions increased to $89m in July.

Tags: NZ Super Fund