BusinessDesk: NZ government’s investment units shed $2.1 bln in 3Q during global slump in stock markets

BusinessDesk: NZ government’s investment units shed $2.1 bln in 3Q during global slump in stock markets

The New Zealand government’s funds under management shrank by $2.1 billion in the third quarter of last year when slumping international equity markets sapped returns from the Crown Financial Institutions (CFIs).

The government’s return from the investment units was minus 4.7 percent in the three months ended Sept. 30, short of the 1.5 percent growth objective, though better than the minus 4.9 percent passive benchmark it targets, according to the Crown Ownership Monitoring Unit’s quarterly report published on its website today.

Total funds under management fell to $41.02 billion from $43.99 billion in a period when stocks around the world plunged as US policymakers struggled to extend its Federal government debt ceiling and America’s credit rating was downgraded by Standard & Poor’s.

The New Zealand Superannuation Fund and Accident Compensation Corp’s investment unit made up 82 percent of the total portfolio at the end of the quarter, down from 94 percent at the end of June. That doesn’t include another $1.89 billion of funds managed by the National Provident Fund which isn’t included in the government’s balance sheet.

A rebalancing of the Super Fund’s assets into growth investments such as international stocks “helped the Crown to recapture some of the value lost during the crisis (in 2008),” the report said. Still, that exposes “the CFI portfolio to short-term market volatility.”

ACC bucked the trend, returning 0.8 percent in the quarter after outperforming in Australian and global equities. Funds under management closed at $17.2 billion as at Sept. 30 from $16.6 billion. Since its inception in 2001, the fund has made annual returns of 9 percent, beating its 7.9 percent target.

The CFIs aggregate return over the past five years was an annual 4 percent, short of the 7.2 percent target, but beating the 3.3 percent passive benchmark it watches. Funds under management have increased by $7.68 billion over the past five years.

The Earthquake Commission continued to sell assets in the quarter, as “claims arising from the Christchurch earthquakes are processed.”

The NZ Super Fund’s valued shed 11 percent in the quarter, and today reported its funds under management declined 0.5 percent in November due to “falling equity markets.”

The fund has lost some 5.7 percent in value so far in the latest financial year after weaker global stock markets coincided with an increased exposure to international equities.

(BusinessDesk)

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If the fund had been invested in nz owned banks then they would have gained 4 or 5 %.

Maybe i have taken a to simplistic view.

I would never trust any government with my money i would much rather flush it down the toilet , at least i no where it went.

It's not your money, it's the reserve banks money. I believe flushing the reserve banks money down the toilet could be prosecuted as an illegal act (similar to burning it). Your bank owns your credit and debit cards as well. In each case the institution which owns the monetary system owns the money. Yes, thats right when you deposit currency into a bank account the bank you deposit with takes ownership of the money you just deposited, they really can do anything they like with it, but you get to become an un-secured lender to this bank, yay! Also note there are 2 monetary systems here, the reserve banks paper system, and the commercial banks electronic system. 

 

Wouldn't it be better having the fund owning 100% of the SOE's Bill and John are wanting to sell?

Then the Government has the cash.  The fund has the income and some capital security.  There would still be diversification as it wouldn't even make a quarter of funds under management.

Best of all cut out those investment banker and manager fees!

And so now you know why the game is being played CJ...it's the $100million at least on offer as a present to the players, who will be expected to smile on the farce called  govt financial management in NZ. And let's not forget JKs old mates are in there...and all the jobs on offer for National pollies in retirement or when they get booted out...so many really important considerations CJ.