ONE of the world’s best-performing sovereign wealth funds, the New Zealand Superannuation Fund, has posted a 14.9 per cent return in the latest financial year, with funds under management swelling to NZ$76.6 billion (S$61.4 billion).
The fund was rewarded for its high exposure to global equities, chief executive of fund manager Guardians of New Zealand Superannuation, Jo Townsend, said on Monday (Sep 9).
“Nonetheless, we do have a very large diversified portfolio and there were certainly solid contributions right across the portfolio over the past year,” Townsend added.
The fund, which began investing in 2003, was created by former finance minister Michael Cullen to help the government pay for the rising cost of the state pension.
It has developed a strong reputation as a global investor, with former chief investment officer Stephen Gilmore poached by US pension giant California Public Employees’ Retirement System earlier this year.
Alex Bacchus is the fund’s acting chief investment officer, and Townsend said filling the role permanently was “an ongoing process”.
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The fund has about 44 per cent of its portfolio in global equities, and 4 per cent in New Zealand stocks. Around 21 per cent is invested in fixed income.
The fund was the best-performing sovereign investor in the 10 years to 2022, based on its 12.1 per cent annualised return for that period, indicated Global SWF, a consulting firm that tracks sovereign wealth and public pension funds.
The annualised 10-year return eased to 10.3 per cent in the results for the year to Jun 30.
By comparison, Australian counterpart the Future Fund last week posted a 9.1 per cent gain for the financial year, and said its annualised 10-year return was 8.3 per cent.
Townsend, an Australian who has been in the role since April, has big shoes to fill. The previous chief executive officer, Matt Whineray, presided over significant growth that saw the fund nearly double in size. Before him, Adrian Orr, now the governor of the Reserve Bank of New Zealand, held the top job.
Townsend said her challenge is to maintain the fund’s robust growth, and meet the New Zealand Treasury Department’s projections which show it doubling in size over the next 10 years and reaching NZ$185 billion by 2040.
The fund pays tax on its returns, something it would like to change, Townsend said.
“We had a contribution from the government of NZ$1.6 billion and we paid NZ$1.5 billion in tax,” she said. “If we were to be tax free, that would create cost savings and efficiencies. But at the end of the day, it is a decision for the government.”
The fund is split between around 50 per cent passive management and 50 per cent active, Townsend said, and the amount actively managed has “grown naturally” over time.
It beat its Treasury Bills benchmark by about 9.3 per cent in the past year, but fell slightly short of the 15.13 per cent return of its reference portfolio.
The fund also invests in local assets such as timber, private equity, infrastructure and property.
New Zealand’s government said last month that it wants to boost capital in state-owned Kiwibank to intensify competition in the banking sector, and will investigate options such as selling a stake to pension and investment funds.
Asked about a potential investment in Kiwibank, Townsend said the fund is “happy to engage”.
“But it has to be the next best idea in terms of all the opportunities on a global basis that we are going to look at for our portfolio,” she said.
“And competition for capital is really tight within the fund. Quite often if we are looking at putting a new investment in the portfolio, we do need to ask ourselves the question, well, what are we going to sell?” BLOOMBERG
