An independent review of the Guardians of New Zealand Superannuation, manager of the $75 billion NZ Superannuation Fund, has concluded that the Guardians is operating at global best practice, describing its investment process as exceptional and saying the Fund stands out amongst its global peers.
The review was today tabled in Parliament by the Minister of Finance, Nicola Willis.
The review’s author, global advisory firm WTW, cautions that the Guardians will need to continue to grow and develop if it is to maintain its status as a global best-practice asset owner, saying returns for all asset classes over the next decade will quite possibly be lower than recently experienced.
The Guardians is required to undergo an independent performance review every five years. The terms of the review are set by the Minister of Finance, who also appoints an independent agency to conduct the review.
WTW, which also carried out the 2019 review, noted a large number of improvements to the investment processes in the past five years, including a more conservative approach to liquidity management, changes to the risk budgeting process, and the shift from Responsible Investment to Sustainable Finance.
The review also found the Guardians continued to have a strong edge in organisational culture, saying culture is well assessed and considered, and remained strong throughout the Covid pandemic and return-to-office period.
The challenge for the Guardians would be to maintain effective combinations within and across teams and across providers as the Fund grew in size and complexity, the review said.
Guardians Chair John Williamson said the review’s findings were very encouraging and a tribute to staff past and present.
“The policies and practices praised by WTW are the product of a focus on continuous improvement that dates back to the Guardians’ very early days,” Mr Williamson said.
CEO Jo Townsend said the review process, which included more than 200 engagements with Guardians employees and Board members and over 100 document reviews, was extremely detailed, making its conclusions and recommendations very valuable.
“While it is of course very satisfying to have the Guardians rated so highly by an independent reviewer, the report’s value to us lies in the recommendations and suggestions for how we can best meet the challenges ahead,” said Ms Townsend.
“How best to consider impact when we assess potential investments, how to maintain our culture as the organisation scales up, and mitigating the many systemic risks facing all investors are just some of the issues we will need to manage if we are to maintain and improve upon our record to date,” said Ms Townsend.
Ms Townsend said the report gives the Guardians Board and management the opportunity to assess its current and future strategies against the world’s best.
“WTW’s guidance will be very much front of mind as we consider how best to scale up and invest the Fund in years ahead.”
Treasury projects that within twenty years the NZ Super Fund will be worth more than $200 billion. By 2044 it will be paying out $1 billion a year to help fund New Zealand Superannuation, and around $4 billion in New Zealand tax annually, and will continue to grow in size. Payments from the Fund are scheduled to commence in 2033.
The full independent review and a summary report are publicly available on the Parliamentary website:
