NZ Super Fund generates strong returns over 2016; now totals $32.7 billion
POSTED ON: 31 January 2017
The NZ Super Fund, set up to help pre-fund universal superannuation, returned 13.2% over the 2016 calendar year (after costs, before NZ tax). The Fund finished 2016 at a new high for the year-end of NZ$32.7 billion.
Since inception in 2003 the Fund has returned 9.9% p.a., and is substantially ahead of its twin performance benchmarks, a market “Reference Portfolio” return and the Treasury Bill return. It has exceeded the Reference Portfolio return by NZ$5.3 billion and the Treasury Bill return by NZ$16.1 billion.
The NZ Super Fund is now worth more than double the $14.88 billion the Government has contributed to it, and has become one of the country’s largest financial assets.
Chief Executive Officer Adrian Orr said: “The NZ Super Fund remains weighted towards growth assets, in keeping with its inter-generational objectives and long investment horizon. We aim to generate the best possible returns over the long term, without taking undue risk. While we will continue to see a range of outcomes from individual investments and over short time periods, the Fund is well diversified and its performance to date continues to exceed expectations.”
Based on current portfolio settings, the Fund is expected to generate an average return of between eight and nine percent per annum over the long term.
“Over the last year, global equities have continued to perform above our long-run expectations,” said Mr Orr. “Looking forward, we expect equity performance to return to a more normal level. When it comes to active investments, we remain highly disciplined on price and on selecting investments that are a good fit with our particular characteristics as an investor.”
“The current global economic environment continues to be challenging for investors, with attractive opportunities often chased by an abundance of capital.”
Recent NZ Super Fund highlights include a NZ$263 million investment in local retail bank Kiwibank, commitments to invest up to NZ$260 million in small-medium sized New Zealand companies, and the appointment of AQR Capital Management, LLC to manage a US$500 million index-relative factors mandate. The new mandate is managed according to a factor investing approach which systematically constructs long-only equity portfolios according to pre-determined factors, aiming to deliver superior risk-adjusted returns, relative to a capitalization-weighted index, over the long-term.
The NZ Super Fund has also added to its portfolio of New Zealand dairy farms. It now owns 21 farms and has invested a total of NZ$260 million in the sector.
In November, the Fund hosted the Annual Meeting of the International Forum of Sovereign Wealth Funds in Auckland. Funds were represented from 15 countries including the USA, China, Korea, Malaysia, Singapore and the UAE.
Mr Orr said priorities for 2017 included implementation of the Fund’s climate change strategy and continuing the establishment of an Investment Hub to help shape investment opportunities in New Zealand.