NZ Super Fund bounces back, climbs past $8 billion

The New Zealand Superannuation Fund climbed past the $8 billion mark during November as it bounced back from a negative return during October.

The fund, set up to meet part of the pension bill of the baby-boomer generation, returned 2.75 per cent during November, a turnaround from the 2.49 per cent loss it suffered the month before on softer international equity markets.

"November gives what October took away, really," said NZ Super Fund chief executive Paul Costello.

October had been a tough month for the fund thanks to softer international equities, which account for more than 50 per cent of its portfolio.

But Costello pointed out that October was one of the fund's "remarkably few" negative months.

The fund's guardians are charged with maintaining a rate of return at least 2.5 per cent above the risk-free rate - around the current Treasury bill yield - over a rolling 20-year period.

In the five months since the start of the fund's 2005-2006 year in July, it has returned 6.9 per cent against a risk-free rate of 2.69 per cent.

Since the fund's inception in September 2003, it has returned 13.4 per cent on an annualised basis against a risk-free rate of 6.01 per cent.

While the fund was travelling ahead of targets, Costello reiterated warnings that it was expecting harder times.

"We think that equity markets have performed strongly over the last few years and we've been expecting a slowdown in them for some time," he said.

"We've long held that equity markets globally are fairly fully priced so our strategy very much has been around building exposure in sectors outside of listed equity markets.

"So over the last year we've been working hard to build our exposure in areas like timber, infrastructure and commodities futures," said Costello.