NZ Super Fund records 14 per cent growth

The New Zealand Superannuation Fund has made a 14 per cent return on investments for the year ending June 30 and now has assets of $6.6 billion, chairman David May announced today.

During the year the fund's assets grew from $3.9 billion to $6.6 billion.

The growth consisted of $2.1 billion in government contributions and $726 million in investment income (after costs, but before tax).

The fund was set up to pre-fund future pension needs by putting aside billions of dollars over the next 20 years to be called upon when demand for superannuation is expected to rapidly increase.

The fund's rate of return for the year was 14.13 per cent (after costs, but before tax). This was ahead of both the risk-free rate of return of 6.33 per cent, and the risk-free rate of return plus 2.5 per cent.

The Fund's primary investment target is to exceed, before tax, the risk-free rate of return by an average of at least 2.5 per cent a year over rolling 20-year periods.

The risk-free rate of return is a measure of performance based upon low risk investments for instance in bonds.

The 2004/5 year generated a higher rate of return than the previous year.

In 2003/4, the return for the first nine months of the fund's investment programme was 7.69 per cent (equivalent to 10.4 per cent for the full year). This means that since 30 September 2003, the Fund's return has averaged 12.5 per cent, against the risk-free rate of 5.88 per cent.

Guardians of New Zealand Superannuation chairman, David May, said he was pleased with result.

"These returns were driven by both strong equity markets and good overall performance by the fund's active managers. The fund was also protected by its policy to hedge a large proportion of its overseas investments back to the New Zealand dollar," Mr May said.

He warned that markets could go up and go down and the success of the fund should be judged over a 20 to 30 year period.

The fund is expected to grow to around $100 billion by 2020.

- NZPA