The New Zealand Superannuation Fund has chalked up a bumper month of gains, with its exposure to growth assets delivering higher returns as global share markets rallied in the second half of the year.
The fund, known colloquially as the Cullen Fund after former Finance Minister Michael Cullen, delivered a total return of 14 per cent in the 12-months ending October 31 excluding foreign currency hedging.
Over a three-year period, assets under management returned 11.8 per cent, while over five years it delivered a gain of 2.4 per cent.
The fund was set up as means to pay for a sharp rise in the number of baby boomers expected to hit retirement in the next 10 years, whose drawdown on universal pension payments would outstrip the tax revenue set aside each year to pay for it.
Perhaps more important than the headline figures was the fund's performance against its benchmarks.
Its mandated benchmark is the 90-day bank bill tate plus 2.5 per cent and the bank bill rate was 4.9 per cent year-on-year, and 5.11 per cent over three years. By comparison, the NZ Superannuation Fund has delivered a return of 7.56 per cent, just shy of the 7.63 per cent attained by the benchmark.
The Super Fund said the returns underscored the value of its long-term investment approach, which allowed it to hold a greater portion of growth assets than the average portfolio.
That's reflected in its asset breakdown, with 60 per cent of the $20.17 billion currently under management invested in global equities.
The remainder was allocated to various assets classes including New Zealand shares, fixed income, infrastructure, forestry, and private equity investments.
The fund's two biggest investments in New Zealand listed firms are Auckland Airport and Fletcher Building, which accounted for 1.7 per cent and 0.6 per cent respectively of the total assets.
Transurban and Zurich Airport were it biggest investments in listed overseas firms, representing 1.6 per cent and 0.3 per cent of assets respectively.
A $927 million investment in Kaingaroa forest was the funds biggest investment, followed by the 50 per cent it owns in Z Energy, valued at $533m as of the end of October.