New Zealand Superannuation Fund (NZ Super Fund), the country’s NZ$47-billion ($30 billion) sovereign wealth fund, anticipates lower returns than what it has enjoyed in recent years as it is taking a less active risk in the short term due to what it foresees as a challenging market this year.
NZ Super Fund CEO Matt Whineray, however, said the fund will remain “well-positioned to exploit emerging opportunities” and is exploring a range of potential investments in New Zealand and abroad, particularly in infrastructure and real estate.
In a statement Thursday, the wealth fund reported a strong 2019 calendar year performance, returning 21.13 per cent, before tax and after costs, which sent its total size to NZ$47 billion. Since its inception in 2003, the fund has returned 10.32 per cent per year and has earned NZ$8.9 billion ($5.7 billion) in value-added returns over its passive reference portfolio benchmark.
Two-thirds of the Super Fund, which has backed private equity funds managed by firms such as Bain Capital, HarbourVest and KKR, is invested in its passive reference portfolio, which returned an impressive 22.74 per cent in 2019, according to a statement.
While Whineray lauded the fund’s solid performance in 2019, against a backdrop of strong market returns, he warned that the coming year presents a range of challenges for investors.
Market dominating issues from 2018 and 2019, such as Brexit and the US-China trade war, have been suppressed, at least for now, Whineray said. However, unforeseen events such as the coronavirus outbreak illustrate how quickly risks can emerge and upcoming events, such as the result of the US general election and the UK-European trade talks, could see former risks resurface.
Interest rates also remain low and asset prices are high, which means there are fewer attractive investment opportunities available, he added.
The International Monetary Fund expects global growth to rise from 2.9 per cent in 2019 to 3.3 per cent in 2020 and 3.4 per cent in 2021, according to data cited by NZ Super Fund. The increase reflects tentative signs that trade and manufacturing activity has bottomed out.
The IMF, however, said the global macroeconomic data still does not include any turning point and the growth forecasts were made before the outbreak of the coronavirus.