We have four "endowments" or competitive advantages - core features of the Fund that are derived from how we were established and which help guide us in our investing decisions.
The four endowments are:
- Long term horizon - we have the ability to invest in illiquid assets and to ride out short-term market movements
- Operational independence - Fund investments are made on a purely commercial basis
- Sovereign status - this allows us to pay lower tax in some jurisdictions and is often favourably regarded by business partners.
- Governance - The Guardians is designed to operate at arms' length from government
In combination, these "endowments", which stem from the way the Fund has been set up, optimise the Guardians' ability to generate superior investment returns for the Fund. These endowments are explained in more detail below.
Due to the long-term growth-oriented risk-return profile of the Fund, the Guardians are confident of adding many billions of dollars (in present day terms) to Government (and national) savings over coming decades. These are investment returns over and above the alternative Government saving option of reducing Government debt.
This expectation is based on economic logic, long-term historical investment performances, and our modelling of likely future outcomes. This research is supported by global expert opinion and the global investment practice of the vast majority of long-term endowment and pension funds.
Our endowments explored
Long term horizon
We are an intergenerational investor. The timing of withdrawals from the Fund is transparent, giving relative certainty and the ability to invest and sustain those investments with fewer liquidity constraints than some others. The NZ Super Fund can invest in illiquid assets and ride out short-term market movements. We are able to invest in growth assets such as NZ and global equities that may be volatile.
The Guardians is operationally independent. The Government may only direct the Guardians about its expectations of the NZ Super Fund's overall risk and return. The portfolio is managed on a prudent, commercial basis and in line with the three legs of our mandate. Operational independence enables us to have a stable level of risk aversion compared with some peer funds.
Sovereign status can be regarded favourably by other parties and positions the Fund as a potential co-investor of choice in New Zealand.
The Guardians is designed to operate at arms' length from government. It has also established a strong governance model, including clear delegation structures and board oversight to support achievement of our long-term mission, and maintain stakeholder and public confidence.