New Zealand Superannuation Fund (NZ Super) has posted a return of 20.71 per cent for the year ended June 30, 2017, one of the best annual performances for the sovereign wealth fund, as it ended the year at a fund value of over NZ$35.37 billion (US$25.22 billion).
The earnings by the Auckland-based fund were largely backed by a sustained rally in global equity markets and the fund’s “active investment strategies” that performed strongly during the year, adding value of 4.4 per cent or NZ$1.3 billion over its passive benchmark, NZ Super said in a statement last month. The fund is aiming to beat the passive benchmark by 1 per cent per year over the long term.
The fund’s exposure at the end of June this year was mainly in global equities (66 per cent), with other asset classes such as Private Equity and Timber seen at 5 per cent and 6 per cent respectively, according to the performance and portfolio report for the twelve month ended June 2017.
NZ Super Chair Catherine Savage said, “The Guardians’ strategic tilting programme, in which it adjusts the Fund’s exposure to different asset classes; its significant investment in North Island forestry business Kaingaroa Timberlands; and the Guardians’ internally-managed credit mandates, were the key reasons the Fund beat the passive benchmark.”
Following June, the fund returned 1.55 per cent in July 2017, bringing the one-year return to 18.21 per cent and upping the fund value to NZ$35.46 billion. Further, in August, it returned 0.95 per cent bringing the one-year return to 17.96 per cent and increasing the fund’s worth to NZ$35.72 billion, based on the fund’s monthly performance reports.
While other sovereign wealth funds like Singapore’s GIC and investment firm Temasek in Asia have been growing well, NZ Super has delivered annual returns of over 10 per cent since it came to life, a commendable return for a fund. In fact, the asset size of the fund could be higher if it did not take a hit because of the ruling National Party suspending contributions in 2009.
Speaking at the World Bank and IMF annual meetings last week, NZ Super CEO Adrian Orr said that there was strong investor appetite for sound long-term infrastructure investments, including climate-related initiatives. He added that there was no shortage in the supply of capital. Likewise, there was demand for long-term capital for relevant development and climate-change projects globally.
“The challenge is in matching the supply of, and demand for, long-term capital,” he had pointed out.
Meanwhile, the fund made its first offshore farm investment earlier this month. It took a stake in leading Australian beef stud Palgrove, bringing its rural land portfolio to 33 farms worth approximately $340 million. The firm looks at rural land as an attractive long-term investment and a good diversifier for its portfolio.