Super Fund returns not guaranteed

The bumper return reported in the June year by the Superannuation Fund would not necessarily be repeated next year, its chairman said yesterday.

David May said in the annual report that the 2004-05 returns were exceptional and unlikely to be consistently repeated.

"While the board is confident the investment portfolio will outperform the risk-free rate of return over the long term, there will inevitably be years when equities perform badly and target return is not achieved," he said.

The risk-free rate of return is a measure of performance based on low-risk investments - for instance in bonds. The board has set a performance objective of beating the risk-free rate of return by at least 2.5 per cent a year.

For the year ended June 30, the fund reported a rate of return of 14.13 per cent, against a risk-free rate of return of 6.33 per cent.

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 service future pension needs by putting aside billions of dollars over the next 20 years.

- NZPA