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.