Growth assets boost super fund

ELOISE GIBSON
Last updated 15:27 20/12/2012

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Another bumper month for the New Zealand Superannuation Fund has lifted the pension pot over its benchmark rate of return.

The fund - into which the Government funnelled $14.88 billion before National froze contributions in 2009 - was worth a record $20.45 billion at the end of November, boosted by its heavy exposure to growth assets.

A 2.01 per cent return in the month of November lifted returns for the year to November to 16.96 per cent.

That puts the Super fund over its long-term performance hurdle, which is to beat the virtually risk-free 90-day bank bill rate by at least 2.5 per cent on a rolling 20-year average.

On average since the fund was created in 2003 it has returned 7.72 per cent a year - 2.62 more than the bank bill rate.

That is after fees but before $2.45 billion in tax paid, which the Super fund counts as a return to the Crown.

The fund, known colloquially as the Cullen Fund after its creator former Finance Minister Michael Cullen, was started to help pay for a sharp rise in pension costs relative to GDP as tail-end baby boomers move through retirement in the 2030s onwards.

Over the years the fund has posted volatile returns because of its heavy weighting to shares and other growth assets.

However, the fund says it is able to withstand big ups and downs because the first money will not be withdrawn for nearly two decades.

On Monday the fund announced it had purchased a 35 per cent stake in technology services company Datacom from New Zealand Post for $142 million.

Its total New Zealand investments, excluding cash, are valued at $3.49 billion or 22.8 per cent of the fund, as it seeks ways to comply with a Government mandate to lift its local investments.

The biggest chunk of the fund is in North America, which accounts for 35 per cent.

Overall 60 per cent is invested in global equities with the rest in various assets 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 1.6 per cent and 0.7 per cent respectively of the total assets.

Transurban and Zurich Airport are its biggest investments in listed overseas firms, representing 1.7 per cent and 0.3 per cent of assets respectively.

A $958.9 million stake in Kaingaroa forest - boosted yesterday when the fund bought an additional 1.25 per cent - is the fund's biggest investment, followed by the 50 per cent it owns in Z Energy, valued at $527.3m as of the end of November. 

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Fund managers the Guardians of NZ Superannuation say that since inception their active investment strategy has added an estimated $1.2 billion compared to the reference portfolio used to estimate what a passive investment strategy would have returned over the same period.

- BusinessDay.co.nz

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