In this ‘Investment Environment Report’, Dr Roland Winn, Senior Investment Strategist, explains the global investment environment and its implications for the NZ Super Fund.

Watch a short video of Dr Winn discussing the investment environment

 Economic Backdrop

The past six months have delivered robust and broad-based global growth, with real, positive improvements across nearly every market, sector and geography. Projections have been revised upwards, and the IMF expects the world economy to grow by 3.5% in 2017 and by 3.6% in 2018.European and Japanese economies have finally responded to stimulatory monetary policy, and emerging markets look to be rebounding from their cyclical lows of recent years. The United States economy remains robust and supported by a strong labour market. Growth is expected to accelerate if the anticipated fiscal stimulus is delivered.

 What does this mean for the Fund?

Our overall use of active risk remains under budget, reflecting our view that many assets are at or above fair value. As a result, the majority (68%) of our investment remains in the Reference Portfolio.  When combined with our active investments, the Fund remains strongly weighted toward growth assets.
We have made marginal new investments in opportunities including a new life settlements mandate and the injection of additional capital into Kiwibank. We continue to look for scalable investment strategies that allow us to use our endowments of a long horizon, stable risk aversion and liquidity profile.

 How has the Fund performed?

The return of our benchmark, the Reference Portfolio, for the 12 months to the end of May was 15.4%, driven by the strong performance of global developed and emerging market equities. For the 12 months to the end of May, the Fund returned 18.2%, equivalent to 2.8% ($800 million) in value add above our benchmark.

 Important Notice

This report has been prepared as a high level summary of certain matters of interest.  It is necessarily generalised and may not be relied upon.  It does not constitute financial,  taxation, legal or professional advice.  Any forward-looking statements in this report are subject to risks and uncertainties, and actual events may differ. No representation or warranty is given as to the accuracy or completeness of this report.  To the maximum extent permitted by law, Guardians of New Zealand Superannuation as Manager and Administrator of the New Zealand Superannuation Fund (and its affiliates, officers, employees and agents) exclude any liability and responsibility in connection with this report.