Chasing best practice key to NZ Superannuation Fund’s success

Matt Whineray has been at the Super Fund for more than 15 years.

The New Zealand Superannuation Fund bounced back in the latest financial year and is still tracking ahead of its reference portfolio, adding about $15.1 billion of value above and beyond what a passive approach would have delivered since it was set up.

The fund’s latest result shows a pre-tax return after costs of 11.87 per cent in the year ended June 30, bouncing back from the sharp sell-off in bonds and equities in the prior year. That lagged behind the 12.03 per cent return from its reference portfolio for the year.

However, since its inception in 2003, the fund delivered an annual pre-tax return after costs of 9.76 per cent, outperforming the reference return of 8.22 per cent. The Government has tipped in $24.9b over that period, but pulled out $9.5b in tax, meaning its investment style has added $15.1b more than what it would’ve achieved as a passive investor, and it now sits at $65.4b.

Risky business

Chief executive of the fund’s manager, Matt Whineray – who departs at the end of this year after 15 years, five of which were spent in the top role – said the fund’s performance through the 2009 and 2020 bull run had been incredible and was because of the choices made to have reasonably strong exposure to growth assets.

“We were able to hold on through some of those slumps. The key was being really clear about what the big risks were.”

Whineray points to legislation establishing the fund as key to its success, especially the direction for the fund to be in line with best-practice portfolio management.

That’s led to a consistent raising of the bar for the fund’s manager as it tapped larger international asset managers for their expertise, and the regular five-year independent reviews have kept its toes to the fire in keeping up to date, he said.

Whineray said it’s important for the Super Fund’s manager to maintain the confidence of its stakeholders in allowing it to pursue strategies that will show the occasional negative annual return, and ensuring people understand the value of those exposures in achieving the fund’s ultimate goal.

A challenging problem

The Super Fund was set up by Michael Cullen in the Labour-led administration through the 2000s to help pay for the spike in superannuation projected by the baby boom population spike. While it didn’t have the support of the Opposition of the time, John Key’s National-led government suspended contributions rather than disbanding the fund.

Those payments into the fund were resumed under the current Labour-led Government, and National’s finance spokesperson Nicola Willis has committed to continuing making contributions if her party wins the Treasury benches in next month’s election.

Catherine Drayton, who chairs the Super Fund’s manager, paid tribute to Whineray’s contribution as chief executive and chief investment officer before that.

“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,” Drayton said in a statement.

The manager’s board is still searching for his replacement and hopes to make an announcement later this year, she said.