It has released its results for the 2019 calendar year, in which it returned 21.13% and grew to $47 billion.
“We are really pleased with the calendar year result against a backdrop of strong market returns,” chief executive Matt Whineray said.
“It is a strong contribution to the future economic health of our country. At the same time, we know markets are volatile and this coming year presents a range of challenges for investors.”
He said disruptions such as Brexit and the US-China trade war had been suppressed for the time being.
However, unforeseen events, such as the coronavirus outbreak, illustrate how quickly new risks can emerge and upcoming events, such as the outcomes from the US general election and UK-European trade negotiations, could see those former risks resurface.
At the same time, interest rates remain low and asset prices are high, meaning there are fewer attractive investment opportunities available.
“In the short term the fund is taking less active risk and we expect lower returns than we have enjoyed in recent years. Looking further ahead we remain well positioned to exploit emerging opportunities and are exploring a range of potential investments in New Zealand and abroad, particularly in infrastructure and real estate.”
At December 31, the fund had returned 10.32% a year since it was founded and had added $8.9 billion over its passive reference portfolio benchmark.
Two-thirds of the Super Fund is invested in its passive reference portfolio, which returned 22.74% for the 2019 year.
Whineray says the reference portfolio did better than the fund’s actual portfolio largely because of the timing of the fund’s private market asset revaluations, which are assessed less frequently than listed equity holdings.
The NZ Super Fund said efforts to contain the coronavirus outbreak would negatively impact first quarter economic growth, particularly in China, those countries reliant on Chinese spending, and corporates reliant on supply chains through China.
“Some of that growth will be recovered when the outbreak comes under control, but some of it is lost for good. Markets were volatile at the start of the year in response to coronavirus, but have priced in a near-term resolution. However, this could reverse quickly if the impacts prove to be enduring.
“The US and China have recently negotiated a deal that has brought some relief to markets that the trade war at least will not worsen in the near term. At the same time, the lingering damage from the past 18 months of tariff escalation is real and will not reverse quickly. The trade war has had a big impact on global manufacturing activity and countries that are reliant on it.
“Europe was particularly hard hit – it is heavily reliant on manufacturing, has demographic challenges, and has little-to-no room for policy manoeuvre. The outcome of the US presidential election will have the biggest impact on future US-China relationships for the better.”
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