Super Fund's value increased in past year by $9.7 bln to a record high $65.4 bln

NZ Super Fund says a strong performance by global share markets during the first half of this year has underpinned an "excellent" full-year result for the fund, which returned 11.9% after costs and before NZ tax.

The fund, set up to help with NZ's future pension commitments, increased in value in the year to June 30 by $9.7 billion to $65.4 billion, a record high for the year end.

The fund said that the global recovery in share prices over the year meant that the Super Fund’s total return slightly lagged that of its Reference Portfolio benchmark, which generated 12%. However, the Fund exceeded its Treasury Bill return benchmark, a measure of the cost to the Government of paying into the Fund, by 8.1% or $4.7 billion.

This was a marked contrast to last year’s result, when a collapse in global bond and equity markets saw the Reference Portfolio lose 14.2%, "and a strong performance by the Super Fund’s active investment strategies saw the Super Fund significantly outperform its benchmark".

Matt Whineray, CEO of the Guardians of New Zealand Superannuation, which manages the NZ Super Fund, said that in the 2022 financial year equities and bonds both performed poorly – "an uncommon scenario" – and the fund's active management strategies contributed significantly to its final result. This year, global equities performed very well, and the Super Fund slightly underperformed the reference portfolio.

"What matters to a long-term investor like us is total fund performance over time. Over the life of the Super Fund our active investment strategies have generated $15.1 billion more than a passive, index-linked strategy would have achieved.

"These active returns, together with the market returns achieved, mean that the Super Fund has earned $41.6 billion more for New Zealand than the cost to the government to fund it."

Whineray said despite the Super Fund’s continued strong financial results, the global investing environment remained challenging.

"Core inflation remains high in many markets, leaving open the possibility of further interest rate rises. At the very least, it would seem any decrease in interest rates may be more gradual and further away than might have been expected," Whineray said.

"Our expectation is that will lead to lower returns overall as central banks prioritise reducing inflation over fostering economic growth; however, we are confident the Super Fund will continue to add value for New Zealanders.

Guardians Chair Catherine Drayton said that the end of September marks 20 years since the first investments by the NZ Super Fund. In the intervening years, $15.5 billion in net contributions have grown into a $65 billion pool of assets.

Drayton said Whineray, who earlier this year announced he would leave the Guardians at Christmas time, had played a large part in the Super Fund’s success.

"In his five years as CEO, and previously as Chief Investment Officer, Matt has helped to shape a culture of excellence that has produced outstanding results over the long term and developed outstanding people."

She said the search for Whineray’s replacement was proceeding, and the board hoped to make a further announcement regarding this later in the year.