KEY POINTS:
The multi-billion dollar Government super fund - the stash of taxpayers dollars set aside for future pension payments, has seen investment returns go backwards by nearly 5 per cent in the past year.
In its annual report released today, the Guardians of New Zealand Superannuation Fund - also known as the "Cullen Fund" unveiled annual returns of minus 4.92 per cent, a loss of $716.5 million.
Government contributions of just over $2 billion during the year meant the fund still grew from $13.1 billion to $14.1 billion, despite the fall in investment returns.
But double digit returns since it was set up in 2003 means the annualised rate of return is still a healthy 10.3 per cent. Last year's return was 14.58 per cent - a gain of $1.6 billion.
In the fund's "Statement of Intent" it estimates its annual return will be 8.1 per cent and it expects a performance like this year's result to happen "perhaps one in every 15 years".
Fund chief executive Adrian Orr said that people were "naturally interested in how the fund had performed through the more recent market turmoil, since mid-June.
"Over July and August, we returned around 0.23 per cent, a small but positive number. However, the market has remained volatile through September," he said.
"We are going through a significant and rapid rearrangement of the global financial system. These are dramatic and unsettling times. Even then, however, the aggregate impact on the fund, while not pleasant, is not outside the bounds of our long-term expectations to date."
Investment opportunities for a long-term fund like the fund were on the rise, said Orr.
Fund chairman David May stressed that today's result comes after four years of "significant outperformance."
"The fund has been impacted in the short term by the turbulence in the global equity markets. The negative impact comes despite our lack of any significant exposure to the subprime market, the finance company sector, or to the liquidity strains suffered by many financial institutions.
May said the fund deliberately invested in world share markets because the guardians expected that they would perform best over the long term.
"The fund's long-term horizon means it is well placed to withstand ups and downs in the market. The board remains confident that this remains the right approach and that the appropriate response to the credit crisis is to remain calm and ready to benefit from the more favourable risk and liquidity premia in the years ahead."
The super fund's result is better than the Government Superannuation Fund, which invests pension money for government employees. On Friday it announced an after-tax deficit of $260.9 million - a minus 6.9 per cent return which it also put down to falling share markets.
Read the report here.
- HERALD ONLINE
