The New Zealand government's funds under management shrank by $2.1 billion in the third quarter of last year when slumping international equity markets sapped returns from the Crown Financial Institutions (CFIs).
The government's return from the investment units was minus 4.7 per cent in the three months ended September 30, short of the 1.5 per cent growth objective, though better than the minus 4.9 per cent passive benchmark it targets, according to the Crown Ownership Monitoring Unit's quarterly report published on its website today.
Total funds under management fell to $41.02 billion from $43.99 billion in a period when stocks around the world plunged as US policymakers struggled to extend its Federal government debt ceiling and America's credit rating was downgraded by Standard & Poor's.
The New Zealand Superannuation Fund and Accident Compensation Corp's investment unit made up 82 per cent of the total portfolio at the end of the quarter, down from 94 per cent at the end of June. That doesn't include another $1.89 billion of funds managed by the National Provident Fund which isn't included in the government's balance sheet.
A rebalancing of the Super Fund's assets into growth investments such as international stocks "helped the Crown to recapture some of the value lost during the crisis (in 2008)," the report said. Still, that exposes "the CFI portfolio to short-term market volatility."
