NZ Super Fund reports 1.89% return dragged down by negative global equities

Wednesday 21st September 2016

The New Zealand Superannuation Fund delivered a lower return in its latest financial year, dragged down by negative returns from global equities.

The fund reported a 1.89 percent return after costs and before tax for the year ended June 30, down from a 14.6 percent return the previous year, according to its latest annual report. The fund, which will help pre-fund national superannuation payments from 2032, finished the June year valued at $30.1 billion, up $560 million from the previous year.

Chair Catherine Savage said the result was robust given the low growth and volatile environment. Global equity markets experienced negative returns through the year, with the MSCI developed markets and emerging markets indices returning a combined negative 1.88 percent.

The fund outperformed its passive reference portfolio benchmark by half a percentage point, or $155 million, during the year, primarily due to a strong performance by active investments in timber and infrastructure. The fund’s single largest investment, a 42 percent stake in forestry business Kaingaroa Timberlands, increased in value by $82 million to $1.49 billion.

Savage said the fund manager’s board remained focused on the long-term, weighting the fund towards growth assets such as global and New Zealand shares and private investments in businesses, including early stage companies. Not every investment would prove successful and the fund’s returns will dip from time to time, she said.

“While these assets can lead to short-term volatility in returns, our emphasis on growth is appropriate given the fund’s long-term horizon and ability to diversify,” she said.

Chief executive Adrian Orr said despite recent fund returns of 3.7 percent in July and 1.2 percent in August, the global investment environment remains challenging with slow economic growth.

"Overall investment returns are likely to be volatile and on a law trajectory for some time," he said.

There’s an abundance of capital worldwide looking for investment opportunities which means asset valuations are fully priced, Orr said. “We are having to work harder to find attractive investment opportunities.”

Its listed equity holdings for the June financial year show New Zealand stock investments total just under $1.5 billion, compared to $2 billion the previous financial year.

Since inception, the Super Fund has returned 9.72 percent per annum as at Aug. 31.

BusinessDesk.co.nz

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