Super Fund sticks with growth assets
The Reference Portfolio is selected as the lowest-cost access to the most relevant, liquid, market exposure the Fund needs to meet its mandate, providing both economic return and a benchmark for active investment.
The Guardians expect the Reference Portfolio to return 7.7% over 20-year periods, 2.7% above the estimated risk free (Treasury Bill) interest rate.
A five-yearly review by the Guardians has found that the Reference Portfolio’s current mix of 80% equity ownership and 20% fixed income assets is appropriate, given the Fund’s 20 year-plus investment horizon. Equity ownership is often referred to as growth assets, because equity values grow in line with underlying economic growth over long periods.
Guardians Chair Gavin Walker said careful consideration had been given to the level of risk it was appropriate for the Fund to take. “Setting the Reference Portfolio is the most important decision we make as a Board. The Fund’s long timeframe and certain cash flow mean it can take on more equity exposure than many other investors. We are satisfied that the 80% growth, 20% fixed income ratio is appropriate. We are prepared to weather volatility in fund returns as asset prices fluctuate in the short-term – indeed, as the Fund experienced during the Global Financial Crisis – in order to maximise long-term performance.”
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