GNZS maintains investment discipline and sees 16% return as markets rebound from March trough (7 May 2009)
POSTED ON: 7 May 2009
Wellington (7 May 2009) - Comments from Mr Adrian Orr, Chief Executive Officer and Mr David May, Chairman of the Guardians of New Zealand Superannuation, during today's regular scheduled appearance before the Commerce Select Committee.
The Chief Executive Officer of the Guardians of New Zealand Superannuation (GNZS), Mr Adrian Orr, today said before the Commerce Select Committee that the key focus for GNZS was to maintain its investment discipline and to ensure the New Zealand Superannuation Fund (the Fund) continued to weather short-term market volatility.
"In our previous appearances before the Committee, when we were congratulated for positive returns, we were very careful to make clear that short-term returns will go up and down," Mr May said. "The Fund's recent returns have indeed been negatively impacted by extreme market volatility".
Mr Orr said, "however, from 1 April to 4 May 2009 our unaudited return has been a $1bn or 8.79% increase, which is up $1.75bn or 16% since the trough in the market in early March1. While also a short-term result, it highlights the futility of attempting to pick and act on short-term signals and that staying our course is the best option for a Fund with our horizons".
Mr Orr emphasized that the Guardians and the Fund were established for a long-term purpose - to reduce the tax burden on future taxpayers of the future cost of New Zealand Superannuation.
"We are in a marathon not a sprint. Under our legislation there will be no withdrawals from the Fund until 2027 with the majority occurring well after that," Mr May said to the Committee. "The engineering of the Fund and the focus of its board and management is therefore on producing returns not only for you, but also for your children and your grandchildren."
The portfolio of the Fund was oriented toward growth assets because it provided greater longer-term rewards for the risk assumed, without any need to "stop out" to realise short or medium-term gains.
"The Fund's portfolio is designed to maximize returns without undue risk and reducing the tax burden on future taxpayers of New Zealand superannuation," Mr Orr said. "We remain convinced of this despite recent turbulence, which has actually resulted in an environment of incredible opportunity for a young, long-term investor such as ourselves."
"In order to maximize investment return we must take investment risk. Taking that risk suits our competitive advantages: our long-term investment horizons; our high tolerance for illiquidity; our ability to invest anywhere, in anything and our sovereign status," Mr May said.
"This has been our approach since inception and it has been publicly disclosed in our approved Statements of Intent."
Mr May acknowledged recent discussion about the extent to which the Fund was invested in New Zealand. "We are actively seeking high-quality opportunities to invest here, in particular in private markets, infrastructure, recapitalization and expansion capital."
The Fund was already significantly invested in New Zealand - 18% or 27% including cash holdings of Funds Under Management - and Mr Orr noted the Guardians' announcement on 1 May of a $50 million cornerstone investment in Direct Capital IV, a local private-equity fund designed to assist mid-sized New Zealand businesses to expand.
Mr Orr also discussed other achievements and developments including:
The Guardians response to the global financial crisis, which had included a greater emphasis on liquidity, an increased cash buffer, more stress-testing of the portfolio and diversification of counter parties Attracting and retaining a strong team of people, many of them returning ex-pats, from countries including the United States, the United Kingdom, Australia and Hong Kong Top-quartile ranking for GNZS performance in implementation of UN Principles for Responsible Investment, against its regional and international peers
For more information please contact:
Paul Gregory, Head of Communications, [email protected], 09 308 2041, 021 274 9994
About the New Zealand Superannuation Fund:
The New Zealand Superannuation Fund, which commenced investing at the end of September 2003, is designed to partially provide for the future cost of New Zealand superannuation. An ageing population means the cost of providing New Zealand superannuation is expected to double over the next 50 years. To prepare for this, the Government is allocating on average NZ$2 billion a year to the Fund over the next 20 years while the cost of superannuation is relatively low. In the meantime, the Fund will invest the money on a prudent but commercial basis.
As the cost of superannuation escalates, the Government will progressively draw on the Fund to help smooth the impact on its finances. As at 31 March 2009 the value of the Fund was NZ$11.5 billion. The Fund is expected to grow to around NZ$109 billion by 2025. For more information visit www.nzsuperfund.co.nz