In its annual report, the fund warns the equity risk premium is, over the next few years, “likely to be below what has been historically enjoyed”.
“At the same time, yields on listed property are at 30-year lows and credit spreads for most grades of non-sovereign debt are near historic lows. This does not bode well for these sectors.”
The recent move by the fund into alternative asset classes may offset this, the report says, but that move will take time. In his introduction to the report, chairman David May warns the fund’s 14.3% post-fee and pre-tax return on assets for the year just finished is no guide to likely future performance.
“There will inevitably be years when equities perform badly and the target return is not achieved…the results in 2004/05 were exceptional and are unlikely to be consistently repeated.”
The Fund is in the process of moving to having 13% of its assets in alternative asset classes by 2007, with the goal of eventually putting 35% of it into those areas.
The breakdown of the allocation for the 2007 target is 3% for infrastructure; 1% for private equity; 5% for commodities; 2% for forestry and 2% for absolute return strategies.
There is though “some elasticity” around those targets and “it is important to stress that the quality of the investment programme will not be compromised by them.”
Some of those investments have been announced already, and the report says other work will become apparent shortly.
| « A stock picker's view of the world | Sovereign takes regulation bull by the horns » |
Special Offers
© Copyright 1997-2024 Tarawera Publishing Ltd. All Rights Reserved