(Sept 16): The New Zealand Superannuation Fund, one of the world’s top-performing sovereign wealth funds, returned 14.2% in the year through June, powered by a rally in global equity markets despite being underweight in outperforming tech stocks.
About half of the portfolio is invested in equities while being underweight US stocks, Jo Townsend, chief executive of Guardians of New Zealand Superannuation that oversees the fund, said Wednesday in an interview.
“For us, it’s about the valuations,” Townsend said, adding that US stocks look expensive. Instead, she said the fund has “found other investment opportunities that we believe will add diversification and return benefits to the portfolio over the longer term.”
NZ Super takes a total portfolio approach, a strategy that involves collaboration across the portfolio management team to optimise the whole portfolio rather than individual asset classes. Around 40% is in private markets investments such as property, timberland and private equity, she said. The fund has also been buying bonds while they are cheaper, although it doesn’t amount to a significant asset allocation change, she said.
Townsend was speaking after NZ Super posted its pre-tax return after costs in the latest financial year, with funds under management rising NZ$9.3 billion (US$5.4 billion or RM21.8 billion) to NZ$94.4 billion. The fund is still on track to double in size every 10 years, Townsend said, adding that as it gets bigger, investing become a “more challenging” task.
“That’s occupying our mind,” she said. “How do we use AI to improve capability and manage risk in the organisation?” She cited “getting ready to manage scale and manage risk in an increasingly volatile environment,” as a key challenge.
The fund, which began investing in 2003, was created by the then-center-left government to help finance the rising cost of the state pension. As a result, there will not be meaningful withdrawals for another 30 years, Townsend said.
Over the 10 years from 2015, the fund’s average annual pre-tax return after costs is 10.3%, making it one of the top-ranked funds tracked by consulting firm Global SWF. Over the past 20 years, it has achieved an annual average return of 9.7%, compared with the reference portfolio’s annual average return of 8.2%.
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