KEY POINTS:
The Government Superannuation Fund said yesterday it made an after-tax surplus of $355 million for the June year, reflecting good results from property and international and local equity investments.
The surplus represented a 9.5 per cent return on the funds assets, now at $4 billion. The pre-tax surplus
was $553 million, or 14.9 per cent, and compares with 13.7 per cent a year earlier.
The chairman of the fund authority, Basil Logan, said the after-tax result had exceeded its investment performance measure by 5.8 percentage points, and over each of the last three years by 4.3 percentage points.
The measure sets a target after-tax return for the fund of 2.5 percentage points a year over and above the after-tax return from the NZX Government Stock Gross Index.
Logan said that, since the authority had been allowed to invest outside government stock, it had added value of $600 million above the returns it would otherwise have made.
He said that the latest result compared favourably with that of other super schemes.
The Mercer Investment Performance Survey, which covers 65 stand-alone New Zealand schemes, had a median average after tax-return of 6.4 per cent for the same period, compared with the fund's 9.5 per cent.
The best performing asset classes in the fund were international equities, which returned 22.36 per cent pre-tax (20.7 per cent in 2006), New Zealand equities at 20.45 per cent (11.4 per cent in 2006) and property, which achieved 22.06 per cent (27.7 per cent in 2006). Returns on New Zealand fixed interest dropped to 2.46 per cent (5.7 per cent in 2006) on the back of increasing interest rates, while international fixed interest at 6.54 per cent (2.9 per cent in 2006) was in line with the long-term average.
Logan said changes to the tax treatment of investments means the authority would change its investment strategy to a higher risk profile. It plans to buy more "growth assets" - shares - and less fixed interest assets.
The new regime will increase the amount of tax payable by the fund.
He said the authority had also implemented a number of new responsible investing initiatives during the past financial year, in addition to its existing legal requirement "to avoid prejudice to New Zealand's reputation as a responsible member of the world community".
The fund has become a signatory to the United Nations Principles for Responsible Investment, appointed a proxy voting service for its direct shareholdings and expanded its investment policies and procedures to cover the wider subject of responsible investment, he said.
Fund Facts
* Funds now stand at $4 billion.
* After-tax result exceeds investment performance measure by 5.8 per cent.
* Fund has $600 million more than if it had been restricted to government stock.
* The authority plans to buy more growth assets.
- NZPA