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The New Zealand Superannuation Fund says it is living in dramatic and unsettling financial times, but it will resist any knee-jerk reactions.

Guardians of New Zealand Superannuation chief executive Adrian Orr told the annual Institute of Finance Professionals, or INFINZ, conference in Auckland today, that direct exposure to financial sector shares, hit by the collapse of Wall Street institutions, had been less than 10 per cent of the fund.

The specific companies that had attracted much of the media attention, such as Lehman Bros, made up less than 1 per cent of the fund.

"By far the biggest impact on fund returns has been due to the indirect effects of the recent financial market turmoil," he said.

The New Zealand Superannuation Fund, which started investing at the end of September 2003, is designed to partially provide for the future cost of New Zealand superannuation.

The Government plans to allocate around $2 billion a year to the Fund over the next 20 years while the cost of superannuation is relatively low.

The fund will release its June year financial results on September 29.

Orr said monthly disclosures meant there was no surprise that over the course of that year it printed a negative return.

He said the fund had warned that the strong positive returns of previous years would not last.

"However, even after accounting for these dramatic events to date, the fund's five-year average return - a more relevant performance measure for a long-term investor like us - remains both comfortably ahead of our comparator risk-free rate, and well in line with our expectations stated at the inception of the fund in 2003."

Orr said the fund would continue to focus on maintaining a highly diversified portfolio, and on evaluating new investment opportunities as they arose.

"We are also exploring strategies that allow us to `lean against the wind', and increase our exposure to investment classes like shares or bonds that appear good value."

Globally many company stock prices were low relative to many reasonable estimates of their underlying earnings potential, he said.

There were some lessons to be learned from previous business cycle swings and past financial crises, which were far more common than people cared to remember, he said.

"Since the 1970s alone we have experienced commodity price and equity price shocks, the US Savings and Loans and the UK banking crises of the 1980s and early-1990s, the Asian Financial Crisis of the late-90s, and European and Latin American banking, currency, and economic crises.

"Each event brought its unique challenges, solutions, and eventual recovery. In general, however, the stats show that it was the long-term investor who kept their nerve that came out ahead."

- NZPA