NZ Super Fund releases 2012/13 Annual Report
POSTED ON: 17 October 2013
The New Zealand Superannuation Fund’s Annual Report for 2012/13, released today, shows the NZ$23 billion Fund has generated significant public wealth since it began.
Since September 2003, when it started investing, the Fund has returned 8.84% p.a. (before tax, after costs), well in excess of the cost of Government borrowing* over this period of 4.94%. The positive return difference represents wealth creation of NZ$6 billion over the period by the Guardians.
The Fund is also well ahead of its passive Reference Portfolio benchmark, with active investment decisions adding an additional NZ$2 billion (or 1.14% p.a.) to the value of the Fund since inception.
The Fund returned a record 25.83% over 2012/13, finishing the year at $22.971 billion before tax.
Chairman Gavin Walker said the Guardians remained committed to a long-term, contrarian investment strategy that was strongly weighted to growth assets.
“The decisions we make today are being made with future generations in mind - not the next few months or years,” Mr Walker said.
On current NZ Treasury estimates the Fund will not peak in size until the 2080s, and will continue for decades after that.
“While the future will no doubt see financial markets experience bad years as well as good ones, the Fund’s ability to ride out and profit from short-term volatility gives it an advantage over investors who are operating on shorter timeframes and with immediate cash flow demands,” Mr Walker said.
Chief Executive Officer Adrian Orr said the Annual Report provided stakeholders with a high level of transparency over the activities of the Guardians and Fund.
The report provides a detailed analysis of the Fund’s performance relative to its benchmarks, and a breakdown of how the Guardians’ active investment decisions had added value.
“This year, for the first time, we have also disclosed the value of each of the Fund’s investments with external asset and investment managers, and the percentage each of these investments makes up of the total Fund.”
Mr Orr said the information put the different investment mandates into perspective and showed the high level of diversification in the Fund across managers and global investment opportunities.
Significant new mandates were awarded during the year in natural catastrophe reinsurance linked investments, European distressed credit and passive global equities.
The Annual Report also discloses that the Guardians has joined an ‘Innovation Alliance’, working with like-minded global investors to identify investment opportunities globally.
In an opportunity identified through the Alliance, the Fund has taken a US$50 million stake in California-based Bloom Energy, a maker of on-site power generation systems using fuel cell technology.
Mr Orr said the Guardians were interested in, among other things, opportunities to invest in innovative technology where the Fund’s long investment horizon would allow companies to grow before going to the public markets.
New Zealand Investments
At NZ$3.4 billion, the value of the Fund’s New Zealand investments remained stable during the year, after showing strong growth since 2009.
New investments during the year included the purchase of a 37% stake in technology services company Datacom, the purchase of an additional 1.25% of Kaingaroa Forest and a NZ$40 million commitment to Pioneer Capital, for investment in privately-owned, small to medium-sized New Zealand businesses.
The Fund also sold a group of 11 North Island forestry blocks and reduced a long-held overweight holding in Auckland International Airport. A partial float of New Zealand transport energy company Z Energy was successfully completed after balance date.
Mr Orr said it was important to understand that as the Fund matured the Guardians would look to sell as well as buy New Zealand investments, in order to maximise long-term returns.
“We continue to seek New Zealand investments, especially where we think our time horizon, certain liquidity, Crown ownership and location provide us with an opportunity to add value. Priorities for 2013/14 include continuing to develop co-investment relationships with Iwi, private investors and larger private companies, and launching our in-house active New Zealand equities team.”
Mr Orr said the Guardians were keen to evaluate any sizeable investment opportunities that might emerge as part of the Christchurch rebuild.
The Guardians, which is currently introducing a new performance reporting system, will announce Fund performance figures for the first three months of the 2013/14 financial year at the end of October.
* As measured by the 90 day Treasury Bill return.
About the New Zealand Superannuation Fund
The New Zealand Superannuation Fund invests globally in order to help pre-fund New Zealanders’ universal superannuation entitlements. The Fund is managed by a Crown entity, the Guardians of New Zealand Superannuation.