The New Zealand Superannuation Fund has posted a 13.9 per cent return for 2014, finishing the year at $27.5 billion, but warns returns will be "more muted" over the coming years.
Stock markets around the world performed strongly last year, continuing what has now been an almost six-year bull market for equities.
Chief executive Adrian Orr said a heavy weighting to global equities and a decline in the New Zealand dollar's strength had helped the fund deliver strong returns.
The fund's 13.9 per cent total return exceeded a 12.4 per cent return from its passive reference portfolio and a 3.1 per cent return for Treasury bills - a measure of the cost to the Government of contributing to the fund instead of paying debt, the Super Fund said.
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Advertise with NZME.Orr said future returns were unlikely to be as strong as in 2014.
"Many asset classes are nearing full value, economic growth remains patchy globally, and it is becoming harder to find good investment opportunities," he said. "While we are confident that the fund will exceed its benchmarks over time, the very high returns of the last few years are unlikely to be repeated - they are the exception, not the rule."
The fund, which has returned 19.6 per cent per annum over the past three years, is expected to generate average annual returns of 8 per cent to 9 per cent over the long term, based on present portfolio settings.
It remained strongly weighted to growth assets, despite having reduced its overall risk level in recent months, Orr said. He said volatility in global markets meant large changes in the fund's value, over short periods, could be expected.
"It's important to retain perspective and understand that these market fluctuations can work to the advantage of long-term investors such as the fund," Orr said.
The fund - established in 2003 with the aim of helping to pay for the future costs of superannuation entitlements - has returned 9.95 per cent per annum since its inception.
