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NZ Super Fund defends performance after missing targets

Tuesday 12th October 2010

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New Zealand Superannuation Fund, which is betting 80% of its $16.2 billion of investments on a rebound in global economic growth, has defended its performance after undershooting its benchmarks.

The fund aims to beat returns from 90-day Treasury bills by more than 2.5 percentage points. It fell short by 0.52 percentage points as at June 30 and by August 31 was 2.57 percentage points short of the benchmark. The annual return of 15.45% was still the second-best performance since the fund's inception.

Chief executive Adrian Orr said while returns missed their target, the fund's performance stacks up well against global peers.

NZ Super "produces results in investment, governance, cost structure, risk management, and organisational capability which are credible relative to our peers," Orr said in the 2010 annual report for Guardians of New Zealand Superannuation.

"We are confident that how we have chosen to manage the fund is as good as, or better than, global peer funds."

The fund's annual report confirms its announcement in July to push more of its holdings into global equities and property. Some 70% of its reference portfolio is in global equities and 5% in global listed property. A further 20% is in fixed interest and just 5% is invested in New Zealand stocks.

It is currently doing due diligence on two local investments as part of its NZ Direct Strategy, which encourages the fund to invest locally and may include cooperative, government or iwi assets.

The report was tabled the same week that the Savings Working Group, set up by the government to find ways to turn kiwis into savers, said it would include consideration of a compulsory pension system but didn't deem it a ‘silver bullet' for the nation's woeful savings record.

The Guardians of NZ Superannuation said in its submission to the working group that it was well placed to play a key role in helping fund the country's ageing population.

Ratings company Standard & Poor's said in a report today that New Zealand's ballooning pension obligations could weaken the nation's long-term credit rating. It expects the pension bill to reach 20.9% of gross domestic product in 2050 from the current 14.4%.

Finance Minister Bill English specifically excluded the pension and the Super Fund from the Savings Working Group's terms of reference, though chairman Kerry McDonald told a media briefing last week the group can recommend the government revisit the issue.

Last week, Michael Littlewood of Auckland University's Retirement Policy and Research Centre, a staunch opponent to the so-called Cullen Fund, questioned the merits of compulsory superannuation. He called for more emphasis to be placed on growing the economy rather than focusing on funding pensions.

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