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Comments from Mr Gavin Walker, Chairman, and Adrian Orr, Chief Executive of the Guardians of New Zealand Superannuation, during today’s regular scheduled appearance before the Commerce Select Committee

Gavin Walker, the Chairman of the Guardians of New Zealand Superannuation, the Crown entity that manages the New Zealand Superannuation Fund, today told the Commerce Select Committee that the Fund was continuing to perform well.

Mr Walker said that as at 20 February the Fund stood at $28.8 billion, and had gained $4.4 billion (pre NZ tax) over the past 12 months, a gain that includes the precautionary write-down of the US$150 million Oak Finance loan.

“The Fund’s 17.47% return over the last twelve months is exceptional,” said Mr Walker.

Noting that returns over the last few years had been very strong, 18.72% p.a. over the three years to 20 February 2015, Mr Walker said the Guardians remained confident that the Fund would continue to exceed its performance benchmarks.

“However, it’s important to note that future returns are likely to be more modest,” said Mr Walker. “Over the long term the Fund is expected to generate average returns of 8% - 9% a year, based on current portfolio settings.”

Mr Walker commended to the Committee a statutory independent review of the Guardians and Fund by Promontory Financial Group, which was completed during 2014.  Promontory’s overall assessment is that “the Guardians run a very professional operation.  The Board is strong and the quality of professional staff is impressive, especially for a small market such as New Zealand.  The Guardians’ approach to investing the Fund is intellectually sophisticated, consistent and disciplined.”  

The report noted that “the Guardians were among a minority of fund managers globally who had been successful in adding substantial value above their benchmarks over a sustained period of time.”

Promontory also confirmed that “the Guardians has implemented appropriate investment systems and controls to manage risk and reduce costs.”

Chief Executive Adrian Orr addressed a range of operational issues.

In regards to Oak Finance, he said: “We are energetically pursuing all appropriate steps to recover the money that we strongly believe is legally owed to the Fund.”

Mr Orr noted that while the sum of money involved is substantial, the Fund was well-diversified and the impact on total Fund performance was minor.

“The strategy of which this investment is part has contributed $900 million to the Fund since it commenced in mid-2009, even after our conservative, precautionary, Oak Finance write-down.”