Guardians of New Zealand Superannuation Annual Report 2020
POSTED ON: 19 October 2020
On behalf of the Guardians of New Zealand Superannuation, I am pleased to present our Annual Report for the 2019/20 financial year.
For the Guardians, as for other investors, companies, governments and people all over the world, the 2019/20 year was ultimately dominated by the impact of the COVID-19 pandemic, both from an investment and an organisational perspective. This global crisis has reinforced once again the advantages the Guardians enjoys in financial markets as an agile, long-term sovereign investor, while highlighting the resilience and commitment of our team.
The theme of this year’s report is a fitting one: tā te wā whakamātau (the test of time). In managing the NZ Super Fund, our role is to reduce the tax burden faced by future generations of New Zealanders from the increasing cost of providing New Zealand Superannuation. At the highest level, what matters is long-term performance.
This sets a clear context for everything we do and constantly reminds us that our horizons are over generations rather than years. In the 17 years that the Fund has been investing, we have generated $26 billion more than the government would have saved by repaying debt, demonstrating our significant and ongoing contribution to New Zealand.
The 2019/20 year was also notable for the Guardians being given a new investment mandate, to oversee the Elevate NZ Venture Fund. This Fund was established by the New Zealand Government in 2019 to support New Zealand’s early stage growth companies and venture capital ecosystem.
In our Report we describe the purpose and performance of our mandates, as well as the Guardians’ organisational strategies, risks and governance mechanisms. The Report also includes the following special features:
- An investor’s perspective on COVID-19 pages 32 – 33 - Chief Investment Officer Stephen Gilmore considers the scale of the market turbulence, its impact on the NZ Super Fund, and our key takeaways from the crisis.
- The Board’s most important decision pages 38 – 39 – Over the past financial year, we undertook a five-yearly review of the NZ Super Fund’s Reference Portfolio. The Reference Portfolio comprises just over half of our actual portfolio, and constitutes the single-biggest influence on Fund returns. In this ‘how we invest’ feature, we explain the process and outcome of the review.
- Strategic Tilting through a crisis pages 42 – 44 – In this Q&A, Alex Bacchus, Manager of the Strategic Tilting programme, details how and why we implemented the strategic tilting programme during the market volatility brought about by the pandemic; as well as the governance conditions necessary to execute what is a long-term, contrarian investment strategy.
- Auckland Light Rail pages 46 – 47 – We reflect on our bid to be the New Zealand Government’s preferred delivery partner for the high-profile Auckland City Centre to Māngere Auckland light rail project.
- Social Media collaborative engagement pages 66 – 67 – Led by New Zealand Crown-owned investors, this collaborative engagement initiative, which brings together 102 global investors representing NZD13.5 trillion in assets under management, asks the world’s biggest social media companies to strengthen controls to prevent the live-streaming and distribution of objectionable content. We detail the progress of the initiative over the financial year.
- Venture capital fund launched pages 70 – 73 – We produce our first report on the progress of the Elevate NZ Venture Fund, established by the Government to support New Zealand’s early stage growth companies and venture capital ecosystem.
- The NZ Super Fund contributions model explained pages 94 – 95 – Contributions to, and (eventually) withdrawals from, the NZ Super Fund are calculated by a legislated contribution rate formula. In this feature we explain the purpose of the formula and how it works in practice to ensure the Fund fulfils its smoothing purpose.
You can also hear directly from our Chair and CIO in the following short videos:
- Chief Investment Officer Stephen Gilmore recaps the performance of financial markets, the NZ Super Fund, and the review of our Reference Portfolio.
- Chair Catherine Savage explains our purpose as an organisation, the new Elevate NZ venture Fund mandate, and reflects on her decade on the Guardians’ Board.
Chief Executive Officer
Guardians of New Zealand Superannuation