Super Fund’s returns back in black after stellar year for stocks

Name: Markets with Madison: Super Fund shift
Uploaded: 2023-09-11T08:30:00+12:00
Description: The outgoing CEO of New Zealand’s Superannuation Fund says its liquidity levels will need to change in the next decade and he hopes its tax bill will too. He explains how its investments have resulted in a 9.69 per cent average annualised return. Video / NZ Herald

By Madison Malone

Senior Business Journalist, host of Markets with Madison·NZ Herald·

8 Feb, 2024 05:27 AM2 mins to read

The outgoing CEO of New Zealand’s Superannuation Fund says its liquidity levels will need to change in the next decade and he hopes its tax bill will too. He explains how its investments have resulted in a 9.69 per cent average annualised return. Video / NZ Herald

The New Zealand Superannuation Fund has made up for previous losses with a 16.03 per cent return in 2023, taking its worth to almost $70 billion.

A recovery in global share markets helped its return to positive growth - a turnaround from 2022′s negative 9.26 per cent return.

“Our reference portfolio, which is made up of 80 per cent shares and 20 per cent fixed interest assets, returned 18.3 per cent for the year, as opposed to our actual portfolio return of 16.03 per cent,” said the fund’s acting chief executive, Paula Steed.

She noted volatility was part of the game it played, but it could weather large moves with its long-term investing horizon.

“In the short term, returns will vary and sometimes quite significantly.

“However, what matters to us is performance over time, and over the lifetime of the fund to date, the Guardians’ active management strategies have earned the fund almost $16 billion more than investing in a passive, index-linked portfolio such as the reference portfolio would have yielded.”

The NZ Super Fund's investment returns will be used to help ease the Crown's future cost of pension payments from 2035.

The state-owned investing fund is aimed to help the Crown cover the future cost of pension payments to superannuitants, with withdrawals from the fund set to begin in 2035.

In dollar terms, it added $8.65b to its value last calendar year, off $2.086 billion in Government contributions - although it paid $190m back to the Crown in income tax.

Since it began investing in September 2003, the fund has returned 9.79 per cent on average annually, and over the past decade has made 10.11 per cent on average.

That was well above its benchmark of Treasury bills.

In its lifetime it’s received $25.75b from the Government in contributions and paid $9.656b in tax - something previous chief executive Matt Whineray publicly complained about.

The fund was yet to announce its permanent replacement for Whineray, who departed before Christmas.

Madison Reidy is the host of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment and has covered business and economics for television and radio broadcasters.