KEY POINTS:
The New Zealand Superannuation Fund will continue to keep its biggest investment in large international stocks despite recent global market volatility.
The Government fund would target high-growth assets because they provided significant financial gain over the long term, regardless of their short term volatility, Guardians chief executive Adrian Orr said yesterday after a portfolio review.
Set up to part-pay New Zealand's future superannuation costs, the fund has achieved far better than expected returns since it was set up in 2003 but it repeated warnings that that would not continue.
"We do anticipate considerable volatility in returns over the next 30 years - as is always the case when taking on financial risk," Orr said.
"We are investing for the long term, so periods of low asset prices provide good opportunities to invest."
There was a 75 per cent chance of a three-year period of negative returns over the next three decades, he said.
The fund has achieved an annualised rate of return of 14.8 per cent a year since it was set up in 2003.
That was above expected returns of at least 2.5 per cent over the yield on 90-day Treasury bills - the risk-free rate of return - over rolling 20-year periods. Treasury bills are currently at 7.55 per cent.
The fund's target holdings included 32 per cent in global large cap stocks, 7.5 per cent in NZ equities and a total 48 per cent in equities; 10 per cent in property; 5 per cent in commodities; 17 per cent in fixed interest; and 5 per cent in infrastructure investments.
Global large cap equities rose 17 per cent in the last financial year and made up 42 per cent of the portfolio.
The best performing asset class last year was emerging market equities, which rose 42 per cent. The $13.1 billion fund is expected to grow to around $109 billion by 2025.
- NZPA
