NZ Super loses $3.3 billion in year

The Guardians of the New Zealand Super Fund have confirmed a loss of 6.99%, after costs, before tax, for the year ending June 30.

Monday, October 31st 2022, 10:00AM

by Eric Frykberg

This was mainly due to falling international markets in the second half of the financial year.

It brought the value of the fund down from $59 billion to $55.7 billion, a fall of $3.3 billion.

This figure, in the annual report, echoes forecasts made earlier by NZ Super managers.

In discussing the fall, the report said global equity prices had dropped almost 16% over the June quarter, following a 5% fall in the March quarter. Bond markets also declined.

Despite this, the guardians remain positive overall.

“In the short term, growth assets such as shares can experience large price fluctuations,” they wrote.

“Over the long-term, however, the fund's exposure to market risk is expected to pay off in the form of higher returns than the cost of the government contributions.”

They quote Treasury forecasts saying the fund will be worth $150 billion by the mid 2030s when it will start to pay money into fortnightly pension payments.

They add by the mid-2070s, when the NZ Super Fund is projected to be at its peak, withdrawals and tax payments combined will cover approximately 20% of the total annual net cost of superannuation.

The guardians also say the fund's overall performance is still well ahead of the cost of Government debt, making it a positive thing for the Government to spend money on.

“Over time, the Fund is expected to earn more in investment returns than the Government is paying in interest on the Treasury Bills it is issuing,” they wrote.

“That is increasing overall Crown wealth and putting the Government in a better position to meet future superannuation costs.”

They went on to estimate the fund has returned $34.6 billion more than the Government would have saved if it had paid down Treasury Bills.

In another positive trend, the report indicated that a policy of not investing in sectors with a bad record on carbon and other environmental criteria had caused no real difference to returns as of this year,

And there was a good long term outlook.

“Over the next 50 years, based on Treasury modelling, the fund will increase in size from about 17% to 39% of GDP and NZ Super Fund tax paid to the Crown will increase from 0.1% to 0.6% of GDP.” the Guardians wrote.

It said 50% of its investments were in North America, 17% in Europe, 15% in New Zealand, 4% in Japan and another 4% in the rest of Asia.

Tags: NZ Super