The New Zealand Superannuation Fund, dubbed the "Cullen fund" by National in Opposition, has been a political orphan for the past six years. National suspended annual contributions with the Budget in deficit and has no plans to put in more when it returns to surplus. The earliest the Government expects to resume contributions, if it is still around, is 2020. Until then, debt reduction or tax cuts have priority over finance for future pensions.

Undeterred, the Super Fund has made good use of the $15 billion put in by the previous Government, investing well when equity prices were low after the global financial crisis. Its assets, now valued at $27.5 billion, have grown at an annual rate of return of 9.95 per cent since 2003. Last year it achieved 16.71 per cent despite writing off $200 million after the collapse of a bank in Portugal.

The decision to invest in a Goldman Sachs loan to the Banco Espirito Santo just weeks before its collapse is the first embarrassing investment by the fund to be publicly disclosed and warranted an explanation. Chief executive Adrian Orr offered one to Parliament's commerce select committee last Thursday.

The Banco Espirito Santo (BES), Portugal's largest listed bank, looked to have a solid balance sheet last June, just before the fund decided to lend it US$150 million through a Goldman Sachs vehicle, Oak Finance. The fund covered its risk with credit default swaps also sold by Goldman Sachs. It sounds too much like the origins of the global financial crisis for comfort, but Mr Orr insists the insurance would have recovered the money had it not been for actions of the Bank of Portugal he called, "totally unforecastable and, we believe, illegal".

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The central bank separated the solvent parts of BES from the insolvent and the debt to Oak Finance was put into the "bad bank" which made the fund's insurance instrument ineffective. According to Mr Orr, all other senior bondholders went into the new bank.

The fund has filed debt recovery proceedings against "Novo Banco" in English courts while Oak Finance is expected to take a case against the Bank of Portugal that could end up before the European Court of Justice. Their recourse to those jurisdictions should be noted by those in this country who oppose international trade agreements that may allow investors to sue sovereign states. Portuguese courts might deal fairly with both suits but they prefer an independent adjudicator.

Mr Orr says the fund is confident of recovering the money though it has taken the "incredibly conservative" precaution of recording the investment as a loss in its latest return. Regardless of its hedging arrangements, many are surprised that it subscribed to a deal assessed by Moody's Investors Service as "speculative and a high credit risk". Moody's took no account of the insurance the fund purchased.

About 70 per cent of the fund's investments are relatively safe in a "passive" portfolio of equities and securities. The rest are in a more "active" category of risk but those have managed to outperform the passive funds by a small amount every year. One bit of bad luck should not be held against them.