NZ Super Fund considers changes

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The New Zealand Superannuation Fund is considering changing its investment strategy for what it calls it public market exposure.

Thursday, March 20th 2008, 7:14AM

The $13 billion fund is split into three groups; fixed interest which makes up around 17% of assets, public markets which are things such as global and New Zealand shares and private markets. Private markets are made up of assets such as forestry, private equity, property and assets that tend to be long-term plays and less liquid than public markets.

The fund's Head of Strategy, Tore Hayward, says after four and a half years the fund is through the set up phase and is now looking at how it invests.

Three options are being considered as possible changes. The first is short-term timing and trying to pick where the markets are going. He says this has been ruled out as there is not sufficient predictability.

The second is a longer term timing plays, which he calls "long term strategic tilting". This involves taking longer-term bets and would only be done if the fund was reasonably confident with its predications.

He says a lot of modelling work has been done looking at markets and the may be occasions, like at the moment, where international shares look to be undervalued.

The third idea is that the fund becomes an "insurance provider" to distressed balance sheets.

Hayward told the Super Funds conference in Wellington yesterday that these ideas are under consideration, but no decisions have been made yet.

He says modelling of its current asset allocation shows that the fund has an "almost 99% probability" of adding value. Since its inception the fund has performed in the top end of its expected return range, but performance since the middle of last year has trended towards the lower end of expectations.

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