The chairman of the Government's superannuation fund said yesterday it was "quite possible" billions of dollars could be lost if investments in overseas shares went sour.
But David May emphasised that no decisions had been made on whether the fund would invest in overseas shares.
However, history showed such investments produced results
in the long term.
Mr May was questioned by MPs on Parliament's finance select committee on possible investments in overseas shares after dismal performances by other super funds, including that for public servants.
The Government's super fund is designed to help pay for New Zealanders' basic superannuation needs in future decades. It will invest around $2 billion a year until it has $50 billion in assets at its peak in 2030.
Mr May agreed that if the fund were invested in overseas equities, it could take some hits in the short term.
He is also a board member of the Government Superannuation Fund (GSF) - the retirement fund for public servants - which lost $324 million in 14 months through investments in overseas share markets.
Opposition MPs have criticised these investments and yesterday Act MP Rodney Hide said the board of the super fund would be taking a "risky gamble" if it bought overseas shares.
By the year 2030 the Government's super fund would have about $58 billion in today's terms if things went well. At that stage about one million people would retire and the fund would be managing about $60,000 per pensioner.
Mr Hide said $6 billion would be wiped off the super fund if it suffered a similar loss to the GSF.
Mr May said a negative return of 5 per cent, resulting in losses of billions of dollars, was "quite possible".
"It might only happen in one in six, one in seven years but it is quite likely to happen if one invests heavily in the sharemarket."
The rationale behind investing in equities had to be considered, he said, adding there was a very high risk in equity investments in the short term.
"There is a high risk of a negative return in any one particular year but ... one has to look at it in the context of a long-term fund."
- NZPA
Herald Feature: The superannuation debate
