A strong performance by global share markets during the first half of this year has underpinned an excellent full-year result for the NZ Super Fund, which returned 11.9% after costs, before NZ tax.**
During the year to 30 June 2023, the Super Fund’s value increased by $9.7 billion to $64.5 billion, a record high for the year end.
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.
It is 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:
“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.”
Mr Whineray said the growth-oriented nature of the portfolio meant that returns generated by the NZ Super Fund would continue to vary from year-to-year, as would the performance of individual investments.
“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.”
“The Super Fund remains heavily weighted to equities, but where we see an opportunity to diversify, optimise risk settings and add value through active investment strategies, we will take it,” said Mr Whineray.
Mr 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,” said Mr Whineray.
“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.”
Mr Whineray also cited the geopolitical tensions driven by Russia’s invasion of Ukraine, and concerns regarding China’s economy, with the renminbi recently hitting a 16-year low, as issues of real concern.
Mr Whineray said the Super Fund’s sovereign wealth fund status and its long investment horizons gave it access to opportunities not available to others and allowed it to ride out, and even take advantage of, a volatile investing environment.
Guardians Chair Catherine Drayton said that the entire Guardians team should be very proud of the Super Fund’s continuing success.
“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.”
Ms Drayton said Mr 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.
“That was again demonstrated earlier this year, when international sovereign wealth fund experts GlobalSWF awarded the Super Fund a perfect score in its GSR (governance, sustainability, resilience) scoreboard and also named it the past decade’s best financial performer of 50 sovereign wealth funds, with an annualised return of 12.1 percent between FY13 and FY22.”
Ms Drayton said the search for Mr Whineray’s replacement was proceeding, and the Board hoped to make a further announcement regarding this later in the year.
**All figures are after costs and before New Zealand tax and are provided on a provisional, unaudited basis. The Guardians of New Zealand Superannuation Annual Report and audited financial statements will be released in late October
