NZ Super Fund lauds active management strategies
NZ Super Fund’s tilting investment strategy has been the main contributor to it beating the market.
Thursday, October 8th 2015, 6:00AM
The fund has released its annual report for the 2014/2015 financial year.
It had earlier been announced the fund returned 14.64% after costs and before tax, beating its reference portfolio benchmark by 4.45%.
The Fund finished the financial year at $29.54 billion.
Chairman Gavin Walker said: “The fund is a long-term one, with a multi-decade purpose. This latest strong annual performance is pleasing, but let’s not get too caught up in the highs and lows of annual or even medium-term rates of return. The performance of the fund over its lifetime is more important.”
Since investing began nearly 12 years ago, the fund has returned 10.11% p.a., generating $13 billion in investment returns over the Treasury Bill return, a measure of the cost to the Government in contributing to the Fund instead of paying down debt.
Chief executive Adrian Orr said the tilting active management strategy had been successful. Managers move the fund asset allocation from its reference portfolio. During the year, the fund had more invested in growth assets than its usual 80%/20% approach, so it was overweight equities and underweight fixed-interest.
“We move towards or away from asset classes and currencies when we think the market has substantially over-reached (up or down) compared with our long-term assessment of relative value,” Orr said.
Tilting has generated an estimated $1.6 billion in value add since April 2009. The strategic tilting programme broadened across emerging market equities and currencies.
During the 2014/2015 year, its active NZ equity managers outperformed the benchmark NZX50 and added 0.05% above the reference portfolio return. The fund also had gains from currency tilting.
At the end of the financial year, the fund had $4.4 billion invested in New Zealand, up from $3.7 billion the year before.
Orr said the fund was looking for more domestic opportunities.
“We believe we have a hometown advantage when investing in New Zealand. We balance this against the need for local investments to stack up against global alternatives, and for the Fund to be properly diversified across countries and asset classes.”
The fund recently reviewed its reference portfolio.
The reference portfolio approach is designed to facilitate decision-making and accountability and is used to benchmark the performance of its actual investment portfolio and the value being added through investment strategies.
In 2010, developed and emerging market equities made up 70% of investments. In 2015, developed markets were 65% and emerging 10%.
New Zealand equities remained constant at 5% and global fixed income at 20%. The reference portfolio dropped its 5% in global listed properties.
The reference portfolio is expected to return 2.7% above cash.
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