NZSF's Performance and Opportunities (6 March)
POSTED ON: 6 March 2008
Auckland (6 March 2008) - Mr Adrian Orr, Chief Executive Officer of the Guardians of New Zealand Superannuation, commented today on the current global financial volatility and the New Zealand Superannuation Fund's investment performance. This comment followed the release of the Financial Statements of the Government for the seven months ended 31 January 2008. It referred to the Fund's $859.7 million investment income decline over this period (pre-New Zealand tax).
Mr Orr said: "The Fund operates in a transparent fashion and posts its performance on a regular basis. We recently made public our performance to end-January, which outlined a minus 5.24% return for the month of January and minus 6.18% for the seven-month period.
"To provide perspective, the Fund has been invested for a little over four years now. Our annualised return since inception is over 11%, which is well in excess of New Zealand Treasury bills returns of 6.63% since inception (refer to graph below). This better illustrates our contribution to the payment of future retirement incomes.
"We are a long-term investor. As such, we fully expect short-term volatility and we are positioned to manage and take advantage of this. The current global equity price correction is more usual than unusual, comes at a good time in the Fund's investing, and provides ongoing opportunity.
"Global equity markets have had larger corrections than we experienced over recent months over similar time scales - seven times now since the 1970s alone. But we know that growth assets deliver considerable financial gains over the long term.
"Our current asset value is around $13.2 billion. We have another $30 billion of capital contributions to invest over the coming 15 years. It is opportune for us to have lower asset prices to invest in now.
"Our Fund is also highly diversified and we have benefited considerably. We remain able to access the higher expected returns from owning growth assets, but with less overall financial risk.
"The recent decline in returns was largely driven by global listed equity and property markets. The Morgan Stanley Capital Index, a wide measure of global equities values, has declined by around 15% in local currency terms since the end of October. We significantly outperformed this index due to the buffer role played by our other assets including fixed interest, commodities, infrastructure, and timber.
"We remain focused on our long-term investment goal, we will take advantage of price corrections, and we will continue to ensure our Fund is appropriately diversified. However, we also expect rough patches in this endeavour," Mr Orr concluded.
The Fund's monthly performance reports are available here.
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Contact details regarding this release: Karine Fox, Head of Communications, New Zealand Superannuation Fund, 09 373 8963, 021 351 141
About the New Zealand Superannuation Fund: The New Zealand Superannuation Fund, which commenced investing at the end of September 2003, is designed to partially provide for the future cost of New Zealand superannuation. An ageing population means the cost of providing New Zealand superannuation is expected to double over the next 50 years. To prepare for this, the Government plans to allocate around $2 billion a year to the Fund over the next 20 years while the cost of superannuation is relatively low. In the meantime, the Fund will invest the money on a prudent but commercial basis.
As the cost of superannuation escalates, the Government will progressively draw on the Fund to help smooth the impact on its finances. As at 31 January 2008 the value of the Fund was $13.2 billion. The Fund is expected to grow to around $109 billion by 2025.
In addition to best-practice management portfolio, and to avoid prejudice to New Zealand's reputation as a responsible member of the world community, the Fund's objective is to maximise returns without undue risk to the Fund as a whole, and expects to exceed, before tax, the yield on 90-day Treasury bills by an average of at least 2.5% p.a. over rolling 20-year periods.