NZ Super Fund posts 20.7% annual return as shares rally

Adrian Orr, Chief Executive of the New Zealand Superannuation Fund. Photo / File

The New Zealand Superannuation Fund delivered a sharply higher annual return after a sustained rally in global equity markets but chief executive Adrian Orr is more cautious about the future.

The fund reported a 20.7 per cent return after costs and before tax for the year ended June 30 versus a 1.89 per cent return it reported in the prior year. The Super Fund, set up to help pre-fund national superannuation payments from 2032, finished the June year valued at $35.37 billion, up $5b on the prior year.

The fund outperformed its reference portfolio return, which reported a 16.3 per cent return over the past year. The reference portfolio is a notional portfolio of passive, low-cost, listed investments suited to the fund's long-term investment horizon and risk profile.

The value of New Zealand investments stood at $4.9b or 14.6 per cent of investments, the fund's manager said in a statement. New Zealand investments exclude cash and foreign exchange hedging instruments.

Orr said the fund's returns "are above our long-run expectations, and we are cautious about the outlook," but will continue to be heavily weighted towards growth assets.

"A long investment horizon and low need for liquidity give us some unique advantages in the investment marketplace both in New Zealand and overseas. Our active investment strategies and strong weighting towards growth assets exploit these advantages in a disciplined and cost-conscious way," he said.

Chair Catherine Savage said the fund is creating significant wealth for New Zealanders on a sustained basis but "it should not be measured on its short-term returns", she said.

"We are here to create long-term value for New Zealand taxpayers. The fund has now returned 10.2 per cent per annum, more than double the cost to the government of contributing to it over a period of nearly 14 years," she said.

Since inception in September 2002, the Super Fund has returned 10.22 per cent per annum and $19.1b has been added to the fund.