NZ Super Fund returns 13% over 2014
POSTED ON: 28 January 2015
The New Zealand Superannuation Fund returned 13.89% over 2014, finishing the year at $27.54 billion.
Chief Executive Adrian Orr said a heavy weighting to global equities and a decline in the New Zealand dollar had combined to deliver strong returns. The Fund’s 13.89% return exceeded a 12.42% return for its passive Reference Portfolio benchmark and a 3.08% return for Treasury Bills.
Treasury Bills are a measure of the cost to the Government of contributing to the Fund instead of paying debt.
Looking forward to 2015 and beyond, Mr Orr said he expected that the Fund would deliver more muted returns.
“Many asset classes are nearing full value, economic growth remains patchy globally, and it is becoming harder to find good investment opportunities.”
Over the long term the Fund is expected to generate average returns of 8% - 9% a year, based on current portfolio settings.
“While we are confident that the Fund will exceed its benchmarks over time, the very high returns of the last few years are unlikely to be repeated – they are the exception, not the rule.”
The Fund has returned 19.6% p.a. over the last three years. Mr Orr said the Fund’s long time horizon, with no payments forecast until 2029/30, meant it was in a position to take on more investment risk than many other funds.
“We are positioning the Fund for the long term. There may be times when the Fund’s performance lags the market. We are prepared to weather this, sometimes for an extended period, in order to get the best long-term outcome.”
He said that while the Fund had reduced the overall level of risk it was taking in recent months, it continued to have a strong weighting to growth assets.
Noting current volatility in global markets, Mr Orr said stakeholders could expect to see sizeable changes in the value of the Fund over short periods. “The size of the Fund can increase or decrease by several hundred million dollars on a daily basis – this is normal and within expected parameters,” said Mr Orr.
“It’s important to retain perspective and understand that these market fluctuations can work to the advantage of long-term investors such as the Fund.”
Mr Orr said the Fund continued to explore opportunities to invest in New Zealand. “We will exploit our hometown advantage when we can, while remaining prudently diversified across geographies and asset classes.”
The Fund has $3.8 billion invested in New Zealand, and has paid more than $3 billion in New Zealand tax over the last five years, making it one of New Zealand’s largest taxpayers. This included $850 million paid during the 2014 calendar year.
Since inception in September 2003 the Fund has returned 9.95% p.a. It has generated $11.4 billion more than the Treasury Bill return of 4.66% p.a., and beaten its passive Reference Portfolio benchmark by $3.1 billion or 1.11% p.a. since inception. All figures quoted are unaudited and provided before NZ tax, after costs.
Media contact: Catherine Etheredge, Head of Communications, New Zealand Superannuation Fund, [email protected], +64 274 777 501