New Zealand's biggest fund loses $1.4b

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Volatile markets have taken their toll on the New Zealand Superannuation Fund, which shrunk by more than a billion dollars in the five months to November.

Wednesday, January 11th 2012, 11:23AM 2 Comments

by Niko Kloeten

The fund, which is New Zealand's largest, was down 5.6% to $17.6 billion during that period, blaming falling equity markets for the decline.

It reached its peak at just over $19 billion in June last year after its best performance to date in the 2010/2011 financial year, when it achieved an absolute return (after fees but before tax) of 25%.

This continued the bounce in 2009/2010 where the fund returned more than 15%, after its worst year in 2008/2009 when the global financial crisis saw it slump to a 22% loss.

However, markets hit a speed bump late last year amid concerns about government debt in Europe and the slow recovery in the US.

The NZ Super Fund is heavily exposed to global market fluctuations, with pre-tilt exposure to global equities at 58.9% of the fund as at November 30 2011.

Since its inception on September 30 2003 the fund has achieved an annual absolute return of 6.65%, beating Treasury bills by 121 basis points per year.

Its biggest listed company investment is in international toll road operator Transurban, in which it has a $316.8 million stake, while its biggest holding in the New Zealand stock exchange is in Auckland International Airport, in which it has $314.4 million invested (1.8% of the fund).

Other New Zealand companies in which it has invested more than $100 million are Telecom ($103.3 million) and Fletcher Building ($102.2 million).

The fund was set up by former Finance Minister Michael Cullen to help fund some of the government's future superannuation costs as the population ages.

Contributions to the fund have been frozen by the National government until the budget returns to surplus.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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