NZ Super Fund returns nearly 20% in 2012

Investment returns from the New Zealand Superannuation Fund, the country's main savings vehicle to fund public pension entitlements, came in at 19.17 percent in the 12 months to December 31, the fund's guardians report.

The monthly update shows the fund finished the year at a record value of $20.92 billion, up from $17.73 billion at the end of 2011, of which $3.49 billion is invested in a range of New Zealand assets, including publicly listed shares, forests, farmland, commercial property and private companies.

Since its inception a decade ago, the fund has achieved a 7.92 percent return on its investments and contends that its active portfolio management policy has added $1.3 billion of the increased value, compared to returns if its funds were passively managed.

Unlike most other managed funds, the NZ Super Fund does not exclude tax payments from its calculation of returns, since tax paid is also regarded as a gain for the New Zealand government, which funds public pensions primarily from tax revenues and borrowing.

The long-term performance so far means the fund has exceeded its own performance target of beating the interest rate return on 90-day Treasury Bills by at least 2.5 percent, with the current return standing at 2.84 percent above the bill rate.

The returns fluctuate, in part because the fund is actively managed. Over the last three years, it has achieved a pre-tax rate of return of 11.54 percent, but in the five years covering the period of the global financial crisis, that return falls to just 4.02 percent.

Some 5 percent of its total assets are held in New Zealand shares, compared with global shares making up 61 percent of its portfolio. Some 36 percent of total funds are invested in North America, 23 percent in New Zealand, 19 percent in Europe, 17 percent in Australia and 13 percent in Asia, including Japan.

A report for the Treasury's Crown Ownership Monitoring Unit last week said that government-owned savings entities, including the NZ Super Fund and Accident Compensation Corporation funds under management, were at close to saturation point on active ownership of New Zealand equities.

If they were to increase their holdings, less active management policies could be required.

Returns in the month of December were 2.33 percent.

(BusinessDesk)