Fuelled by growth in global equities, NZ Super reported a barnstorming performance in the financial year ending June 30 with an 11.9% return – the best return of its peers reporting over the same period.
The fund swelled by 17.4% to a record NZ$65.4 billion (US$39 billion), although the heavily equities-weighted fund came a whisker behind its benchmark return of 12%. This was a stark contrast to the previous financial year when the fund outperformed the reference portfolio based on a passive, index-linked strategy, which lost 14.2%. In FY2021/22, NZ Super experienced a 7% loss and a fall in asset value from NZ$59.8 billion to NZ$55.7 billion.
NZ Super significantly outperformed Australia’s Future Fund, which reported a return of 6.0% in FY2022/23 and a 10-year annual average of 8.8%. In Global SWF’s ranking of funds by governance, sustainability and resilience, NZ Super comes joint first with Temasek, NSIA and CDPQ with a 100% score, proving that these factors are not
For investors like NZ Super that have inter-generational savings mandates, the main issue is not the annual return, but long-term return. In this aspect, the New Zealand fund easily beats its peers with a 10-year average annual return of 10.75% - 195 basis points above its reference portfolio, thereby demonstrating its value added. It has earned NZ$15.12 billion (US$8.95 billion) above its reference portfolio since inception.
Matt Whineray, CEO of the Guardians of New Zealand Superannuation, which manages the NZ Super Fund, said: “In FY2022, equities and bonds both performed poorly – an uncommon scenario – and our active management strategies contributed significantly to our final result. This year, global equities performed very well, and the Super Fund slightly underperformed the reference portfolio.”
Whineray warned that in the new financial year, risks include monetary authorities hiking interest rates to control inflation, geopolitical tensions driven by Russia's invasion of Ukraine, and a slowdown of China's economy.
Last week, NZ Super announced it had invested almost US$300 million in financial services provider Euroclear. The decision is a major turning point for the New Zealand investor that usually invests through funds, rather than directly. While NZ Super has originated its own direct investments over the years, they are relatively few and oriented towards New Zealand. Its real estate, timberland and private equity direct investments are decisively antipodean.
NZ Super Fund Head of Direct Investments Will Goodwin said the Euroclear transaction, which makes the NZ Super Fund the company’s fifth-largest shareholder, provided a rare opportunity for the NZ Super Fund to increase its exposure to the global financial services sector.
He said, “It is an attractive, high-performing asset which suits our growth profile and will help diversify our investment portfolio. NZ Super Fund will provide the type of stable and patient capital ideally suited to our growth strategy, which is focused on enhancing the value provided to investors, issuers, broker dealers, shareholders and communities through our core product and service offering, while upgrading our capabilities in ESG, data, digital and, as we continue to expand, our geographic reach.”
NZ Super Fund's CEO, Matt Whineray, announced in May that he will be leaving his post at the end of the year after 15 years at the fund. Until then, he is working with the Board of Guardians to lead a number of programs of work that will double the fund's size in the next decade, and to assist them in the search for his replacement.
The Super Fund was created by a Labour-led Government in 2001 to smooth the cost of superannuation between current taxpayers and future generations with investments primarily in foreign assets.
Under the Ardern administration that ended in January, contributions to NZ Super Fund resumed in 2017, eight years after they were stopped by the National-led government as it responded to the global economic crisis. In her tenure, NZ$7.52 billion was transferred to the SWF, while the fund grew by NZ$20.33 billion to NZ$55.7 billion (US$34.2 billion) by end-FY2021/22 – an increase of 57% from 2017.
