NEW ZEALAND - The New Zealand Superannuation Fund saw its assets more than double over the year ending June 30 on the back of solid returns from equity markets, growing by AUD$2.6bn to $6.6bn.
In the 12 months to June 30, 2005 the fund’s assets grew from $3.9bn to AUD$6.6bn - marking a return before tax of 14.13%. The growth consisted of AUD$2.1bn in government contributions and AUD$726m in investment income.
Commenting on the performance, David May (pictured), chairman of the Guardians of New Zealand Superannuation, said: “These returns were driven by strong equity markets and good overall performance by the fund’s active managers. The fund was also protected by its policy to hedge a large proportion of its overseas investments back to the New Zealand dollar.”
The 14.13% return was ahead of the risk-free rate of return of 6.33%. The fund’s primary investment target is to exceed, before tax, the risk-free rate of return by an average of at least 2.5% per annum over rolling 20-year periods.
Despite the positive performance, May warned markets were unpredictable.
“Because markets can go down as well as up, too much should not be read into the strong results in the first two years,” he said.
“The success of the investment strategy will be fully judged over the next 20 to 30 years. Nevertheless, the board is confident that a sound framework has been established and is very encouraged by the performance achieved to date.”
The fund’s asset allocation stands at 8.4% domestic equities, 14.6% domestic fixed interest, 2.9% property, 43.2% large cap global equities, 9.3% small cap global equities, 3.6% emerging markets equities, 0.5% global infrastructure, 16.1% global fixed interest and 1.4% cash.
The NZ fund was set up to smooth the impact on government finances of funding the super payments of an ageing population. The cost of providing benefits is expected to double over the next 50 years.
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