Global Equities Rebound Propels NZ Super to 11.87% Return

The New Zealand Superannuation Fund credited a strong rebound in global equities for propelling its investment portfolio to an 11.87% return, before taxes, for the fiscal year that ended June 30, raising its asset value NZ$9.7 billion ($5.7 billion) to a year-end record high of NZ$65.4 billion.

The pension fund just missed its benchmark portfolio’s 12.03% return for the fiscal year, but the performance was still a significant improvement from last year, when the pension fund lost 6.99%. According to NZ Super, the portfolio also outperformed its Treasury Bill return benchmark, a measure of the government’s cost of paying into the fund, by 8.1% or NZ$4.7 billion.

“In FY 2022, equities and bonds both performed poorly—an uncommon scenario—and our active management strategies contributed significantly to our final result,” said Matt Whineray, CEO of the Guardians of New Zealand Superannuation, which manages NZ Super, in a release. “This year, global equities performed very well, and the Super Fund slightly underperformed the reference portfolio.”

“What matters to a long-term investor like us is total fund performance over time,” Whineray said in the release. “Over the life of the Super Fund, our active investment strategies have generated NZ$15.1 billion more than a passive, index-linked strategy would have achieved.”

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The pension fund also reported five- and 10-year annualized returns of 7.98% and 10.75%, respectively.

Whineray said the pension fund will continue to be heavily weighted to equities but added that “where we see an opportunity to diversify, optimize risk settings and add value through active investment strategies, we will take it.” He also said that despite the strong performance during the fiscal year, the global investing environment ahead remains a challenge.

“Core inflation remains high in many markets, leaving open the possibility of further interest rate rises,” Whineray said in the release. “At the very least, it would seem any decrease in interest rates may be more gradual and further away than might have been expected Our expectation is that will lead to lower returns overall as central banks prioritize reducing inflation over fostering economic growth.”

Guardians Chair Catherine Drayton said a search for a successor for Whineray, who announced his retirement earlier this year, is underway and that the board hopes to make an announcement later in the year.