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Source: MIL-OSI Submissions
Source: New Zealand Superannuation Fund

The Guardians of New Zealand Superannuation, the independent Crown entity that manages the NZ Super Fund, remains confident in its long-term investment strategy, despite the challenges caused by the COVID-19 pandemic and a tumultuous year in financial markets.

Representatives from the Guardians appeared today via video link before Parliament’s Finance and Expenditure Select Committee for the annual review into its performance.

Chair Catherine Savage, speaking at her final appearance before the Committee as Chair of the Guardians, assured Committee members the $54 billion Fund was exceeding its long-term performance benchmarks.
 
“The wealth that has been created over nearly eighteen years of investing represents a meaningful contribution toward our purpose, to help pay for the cost of providing universal superannuation to future generations of New Zealanders.

“Investment returns over this time have averaged more than 10 percent per year. This is significantly ahead of both our benchmarks – the Government’s cost of debt, and the passively invested Reference Portfolio, and represents real value for taxpayers. Since we began investing in 2003, the NZ Super Fund has returned more than $33 billion more than the Government’s cost of debt.”

Ms Savage will retire from the Board at the end of this month after more than 10 years’ service. Fellow Board Member and current Audit Committee Chair Catherine Drayton has been appointed to succeed Ms Savage, effective 1 April 2021.

Ms Drayton begins her term as Chair following a period of heightened volatility in financial markets, which saw the Fund experience large swings in value over the course of the year.

At the height of the COVID-19 uncertainty in March 2020, volatile share prices meant the Fund was down 28 percent from its prior peak in late February, losing $13.4 billion of its value.

The Fund has since rebounded strongly, returning 53 percent from its low point in March 2020 to date. This represents the fastest period of growth since its inception.

With sustained withdrawals from the Fund not expected to begin until the 2050s, the Fund is well-placed to ride out, and profit from, short-term periods of volatility.

The Guardians responded to the large market movements through rebalancing the portfolio to maintain its long run risk exposure, and using several active, contrarian investment strategies in order to enhance returns over the long-term, Ms Savage said.

Ms Savage further assured the Committee on the Guardians’ operational capability. “Our IT infrastructure and remote working capability is robust, and we were fully operational throughout the year while the entire team was working remotely through both lockdowns. We continue to invest in people and technology in order to ensure we have the capacity to meet our mandate and deliver over the long-term.”

Over the past year the Guardians delivered a number of long-running projects and strategic initiatives:

The launch of the Elevate NZ Venture Fund, the Guardians’ second mandate. New Zealand Growth Capital Partners, which invests the fund, overseen by the Guardians, has made good progress in allocating capital to three NZ-focused venture capital managers and in the deployment of capital to investee companies by those managers.
 
Achieving and exceeding the Fund’s carbon reduction targets, originally set in 2016. The Fund has no material long term shareholdings of fossil fuel reserves, with no future investments in fossil fuel reserves contemplated. The Fund has also reduced its exposure to carbon emissions by 40%.
 
Completing a review of the Fund’s Reference Portfolio, which reaffirmed the Guardians’ commitment to a portfolio that is heavily weighted towards growth assets.

On her rotation off the Guardians’ Board, Ms Savage said “I have valued the experience, the people I have served and worked with, and the opportunity to lead an organisation committed to furthering the financial wellbeing of future generations of New Zealanders.

“During my time at the Guardians I am most proud of our leadership in responsible investment, the wonderful team we have built and the value we have added to New Zealand. I look forward to watching the Guardians go from strength-to-strength.”

Incoming Board Chair Catherine Drayton says, “The NZ Super Fund plays an important role in New Zealand’s capital markets and is recognised internationally for its investment approach.

“We’re constantly looking at how to improve how we manage the Fund, including strengthening our responsible investing approach, creating new ways to add value to returns, and identifying technology advances that will help deliver more insights and efficiencies in how we operate.

“The size of the Fund is expected to double during the coming decade and I will be focused on helping the team prepare for that growth.”

About Catherine Drayton

Catherine Drayton has been appointed Chair of the Guardians’ Board, effective 1 April 2021. Catherine joined the Board in November 2018 and is the current Chair of the Board’s Audit Committee.

A professional company director, Catherine’s governance roles include Chair of Christchurch International Airport, and director of Genesis Energy, Fronde Systems Group, and Southern Cross Medical Care Society and Southern Cross Hospitals.

Former directorships include Beca Group, Ngāi Tahu Holdings, technology company PowerbyProxi (which was acquired by Apple) and Meridian Energy.

Catherine is based in Canterbury. In her earlier executive life she was partner in charge of audit and advisory services for PricewaterhouseCoopers in Central/Eastern Europe (excluding Russia and the Stans), with her speciality being mergers & acquisitions.

MIL OSI