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GSF winds back intl share exposure

The $3.1 billion Government Superannuation Fund has reported a small profit for the year and has changed some of its target asset allocations.

Friday, October 3rd 2003, 1:36AM

by Rob Hosking

Two years to the day since being “liberated” from its fixed interest-only mandate the Government Superannuation Fund Authority has reported a small after tax profit.

The $3.1 billion fund has reported a profit of $33 million for the year ending June 30.

The fund, which provides pensions for civil servants, has weathered a firestorm of political criticism during the past year after it took a bath in the international equity markets.

Despite that the fund’s approach has not changed, chairman Basil Logan said yesterday.

“The criticism we faced was taking a short term view: we have always taken a long term view of returns.”

However, the authority has scaled back its long-term investment objective from an average after tax return of 3% to 2.5%. Logan says the volatility of the markets is reflected in the fund’s results Its international equity investments made a loss of $166 million, or $16.01%, in the first quarter of the year, before making a positive return of $140 million, or $14.19%, in the last quarter.

Overall the GSF’s international shares recorded a loss of $432 million for the year.

The GSF Authority has reviewed its asset allocation and is winding its target for international shares back from 52.5% to 42.5%.

The allocation to New Zealand shares is being increased from 12.5% to 15%.

Logan said the shift was not as a result of political pressure but rather due to the performance of the New Zealand stock market in comparison with international equities.

Yet to be determined is where the 7.5% allocated to “other growth assets” will go.

That will be one of the main strategic decisions of the coming year, GSF chief executive Alan Langford said. The money - which on current values amounts to about $237 million - will go into private equity investments and property and similar non-sharemarket assets, he said.

“We don't expect them to be high risk assets.”

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

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