Liam Butler interviews Catherine Etheredge NZ Super Fund

Question:

The Guardians are required to invest the Superannuation Fund on a prudent, commercial basis consistent with best practice portfolio management, maximising return without undue risk to the Fund as a whole. How can older people learn more about the investments in the fund?

 

Catherine Etheredge:

The purpose of the New Zealand Superannuation Fund is to help pre-fund the cost of Government-provided superannuation. Because New Zealand’s population is ageing, tomorrow’s taxpayers face a big burden to pay for universal super. The Fund is a way to smooth the cost between today’s taxpayers and future generations.

The Fund was established in 2001 and investing began in 2003. It is managed by the Guardians of New Zealand Superannuation, a 100-person Crown entity based in Auckland. The Fund now contains investments worth around $30 billion, and has returned more than 10% p.a. since inception (after costs and before NZ tax). It is not expected to peak in size until 2080.

The Fund is highly diversified across geographies and different asset classes such as shares, real estate, timber, infrastructure, insurance and bonds.  Around 80% of the Fund is invested passively in line with global market indices – this is a very low cost way of investing.  The remaining 20% of the Fund is invested in opportunities that the Guardians believe will be useful diversifiers, or will deliver a better return, for the risk involved, than passive investments.

These active investments include stakes in the New Zealand IT services company Datacom and retirement village operators Metlifecare and RetireAustralia.

Because the Fund has a long time horizon it can afford to take more risk than many other investors.  For example, it can invest in privately owned businesses that may be difficult to sell quickly, but which can be expected to offer a premium return over time. Examples of this sort of investment include the Fund’s $1 billion investment in Kaingaroa Timberlands, a large forestry business in the North Island.

For more information about the Fund see its website at www.nzsuperfund.co.nz. The website provides insight into the Fund’s investment beliefs, the Reference Portfolio (which is a core concept for how the Fund is managed by Guardians), investment themes and performance.

There’s also a lot of information about the Guardians’ approach to responsible investment on the website.  We believe that environmental, social and governance (ESG) factors are material to long term investment returns. These factors are therefore integrated into our analyses of which investment sectors and companies we should invest in. We also use our influence as a shareholder to encourage companies to improve their management of ESG factors.

Other useful areas on the website include an overview of our approach to investing in New Zealand, a library of articles, papers and reports, and short videos featuring some of the Guardians staff.

Our Annual Reports, also on our website, have won a number of awards.  They provide a commentary on the year gone by and feature case studies on some of our investments. The reports describe how the Fund has performed relative to its benchmarks, and explain how the Guardians’ active investment decisions have added value during the year. Each report also includes a dedicated responsible investment report, and a list of the external investment managers we used during the year.

One question that we are asked regularly is whether people can invest in the Fund.  The answer is no – we only invest contributions from the Government.  See www.sorted.org.nz for more information on personal finance.

Questions about the Guardians and the Fund can be directed to enquiries@nzsuperfund.co.nz.

About Liam Butler