The fund created to meet New Zealand’s future retirement requirements has grown in value by more than $ 15 billion over the past year.
The fund created 20 years ago to meet New Zealand’s future retirement needs just saw its highest annual return on record, increasing its value by 29.63% to $ 59.8 billion.
NZ Super Fund chief executive Matt Whineray (pictured) said the $ 15 billion increase in the fund’s value in the fiscal year ending June 30, 2021 was “exceptional.”
“The past year demonstrates the importance of sticking to our long-term investment strategies, which are designed to adapt to market cycles. The Fund has a portfolio composition that was well positioned to derive strong returns from the rise in asset values over the year.
In the almost 18 years since investing in 2003, the Fund has generated a return of 10.67% per annum (after fees, before New Zealand taxes). It topped the 90-day T-bill yield by 7.14% per annum, or $ 39.1 billion in total, and the fund’s “benchmark portfolio” by 1.24% per annum.
Whineray says these are world class results.
“What this means is that the team added $ 10.6 billion in value above what would have been achieved with a simple, market-indexed passive portfolio. This is achieved through active investment strategies that leverage our endowments, such as our strategic tilt program, private market assets, and credit and finance investments.
The government’s net contributions of $ 12.4 billion have now become a nest egg of $ 59.8 billion, set aside to support future superannuation payments.
The government is expected to start withdrawing from the Fund to help pay for retirement pensions from the mid-1930s, and the Fund is expected to continue growing as a percentage of GDP until 2070.
“Given this time horizon, we have built a growth-oriented portfolio that will generate strong long-term returns and perform well in times of market expansion,” said Whineray.
However, there is some caution for the coming year.
“As markets continue to perform well and economies rebound, supported by accommodative fiscal and monetary policy around the world, we may be looking at a period of rising inflation and rising interest rates. This combination is expected to weigh on business returns and create a difficult investment. We don’t expect the outperformance of recent times to continue forever, ”said Whineray.
At the same time, the continued impact of Covid-19 and the uncertainty over the variants of the virus weighs on economic sentiment. It is a recipe for the continued uncertainty that we aim to tackle by focusing on performance. long-term fund. “
Here’s what’s in the fund:
The Fund’s investments in New Zealand include stakes in Kaingaroa Timberlands, Kiwibank, Datacom, LabTests, Fidelity Life, $ 2.5 billion in listed stocks and a range of investments in real estate, farmland and corporations. of small and medium size growth.