KEY POINTS:
The Government Superannuation Fund (GSF) has recorded an after-tax deficit of $260.9 million in the year to June 30, which it puts down to falling share markets.
The deficit represents a minus 6.7 per cent return on average assets.
The fund, which invests pension funds for government employees as distinct from the New Zealand Superannuation Fund - known as the Cullen Fund, has been closed to new members since the early 1990s.
New Zealand Superannuation Fund reports its performance on Monday.
There are ups and downs behind the average. GSF notched up a 73.8 per cent gain from trading an index of commodity futures, and most of that came from a strong oil price.
GSF took a hit on its equity investments both in New Zealand and overseas. The value of its international equities fell 12.3 per cent compared to a 22.4 per cent gain in the previous year. The value of its New Zealand equities fell 22.1 per cent and the value of its real estate investments fell 13.2 per cent.
GSF moved to active management of international equities from October 1 after tax rules that had favoured passive investment changed.
The fund had to pay 5 per cent tax on the market value of its international equities under new tax rules, even though it made a loss and it can no longer claim tax deductions for losses on New Zealand equities.
Its New Zealand fixed interest investments made a 9.5 per cent gain and international fixed interest an 8.9 per cent return.
As at June 30, GSF's net assets stood at $3.57 billion, down from $4 billion in 2007.
The pre-tax deficit was $210m, a return of minus 5.4 per cent on average assets.
"The extent of the current shakeout in the US market, and its flow on effects, are naturally of concern," said Tim McGuinness, chairman of Government Superannuation Fund Authority Board.
But he said values would inevitably increase again.
GSF had significant exposure to growth assets, including equities.
"The board remains confident that its investment strategy is soundly based," he said.
GSF is expected to pay entitlements to members for the next 60 years. The fund's performance has no impact on members' entitlements which are fixed by legislation.
- NZPA
