Understanding NZ Super Fund's Investment Approach and Goals

The NZ Super Fund is a significant player in New Zealand's financial landscape. It's a sovereign wealth fund that was established in 2001 to manage a portion of the country's future superannuation costs.

The fund's primary goal is to generate returns that will help pay for New Zealanders' retirement in the future. This is a long-term investment approach, with the fund aiming to achieve a net return of 7-9% per annum over the next 30 years.

The NZ Super Fund's investment approach is diversified across various asset classes, including shares, bonds, property, and infrastructure.

The NZ Super Fund's investment strategy is built around a long-term approach, with withdrawals not scheduled until 2035/36. This allows the fund to focus on growth-oriented investments.

The fund's highly diversified global investment portfolio is designed to take advantage of its long-term horizon and risk profile. It has an 80:20 split between growth and fixed-income investments.

The fund's foreign currency exposures are fully hedged to the New Zealand dollar, which helps to minimize potential risks. The Guardians aim to add more value to the fund after all costs than the reference approach would.

The New Zealand Super Fund has a long investment horizon, with withdrawals not scheduled until 2035/36, and the NZ Treasury estimates it will keep growing until the 2070s.

The Fund's highly diversified global investment portfolio is heavily growth-oriented, with an 80:20 split between growth and fixed-income investments.

The NZ Super Fund uses a Reference Portfolio to benchmark the value being added through active investment strategies.

This Reference Portfolio is a shadow or notional portfolio of passive, low-cost, listed investments suited to the Fund's long-term investment horizon and risk profile.

The foreign currency exposures of the Reference Portfolio are 100 per cent hedged to the New Zealand dollar.

The Guardians aim to add more value to the Fund after all costs than the reference approach would, using strategies based on the Fund's natural advantages as a long-term, sovereign investor with known liquidity requirements.

The New Zealand Superfund has made significant strides in divestment, a key aspect of our investment strategy.

In 2017, the Superfund quit or reduced holdings in 300 fossil fuel companies, making 40% of all Superfund investments carbon neutral.

This move was a direct response to the risks posed by climate change, which Chief Investment Officer Matt Whineray deemed "not being properly priced by the markets".

Companies such as ExxonMobil, Shell, and BP were among those affected by the Superfund's divestment decision.

The Superfund's decision to divest from fossil fuels was a major victory for campaign groups like 350 Aotearoa and Greenpeace Aotearoa New Zealand.

In fact, 350 Aotearoa had been campaigning for the Superfund to divest from fossil fuels for a year before the decision was made.

The Superfund's divestment from fossil fuels is a significant step towards a more sustainable investment strategy.

New Zealand has significant investments in Israeli companies and government bonds, totaling NZ$29,510,559 in five Israeli software and IT companies and NZ$5,996,326 in Israeli sovereign bonds.

These investments are under scrutiny due to potential breaches of New Zealand's ethical investment guidelines. The Super Fund's sustainable investment framework excludes investments in government bonds of states with widespread condemnation or sanctions by the international community.

In September, 124 states, including New Zealand, voted in the UN General Assembly to call for an end to Israel's unlawful occupation of East Jerusalem and the rest of the Occupied Palestinian Territory, meeting the first requirement of "widespread condemnation".

However, New Zealand has not imposed meaningful diplomatic, economic, or military sanctions on Israel, failing to meet the second requirement.

The Super Fund's framework also considers international law and the severity of the breach of standards when making investment decisions, which may be relevant in this case.

The NZ Super Fund's strong returns are a testament to its resilience, allowing the government to allocate resources effectively while maintaining long-term financial security for an ageing population.

This fund's consistent growth is a key factor in mitigating future fiscal pressures, ensuring that the government can make informed decisions about resource allocation.

The NZ Super Fund's performance highlights the importance of planning for the future, particularly when it comes to supporting an ageing population with growing financial needs.

In a challenging economic landscape, it's heartening to see strong returns from key New Zealand funds. The NZ Super Fund and ACC portfolios are forecast to remain crucial to the country's financial stability.

These funds are expected to contribute a substantial $38.8 billion to the growth in total financial assets by June 2029. This is a significant injection of capital into the economy.

The government expects a net operating deficit of $10.2 billion for the year ending 30 June 2025, yet the Hyefu report anticipates a more optimistic outcome. The report predicts $9.5 billion in net gains on financial instruments, thanks to the solid performance of both portfolios.

This difference in projections highlights the importance of accurate forecasting in financial planning.

Sustaining Fiscal Stability is crucial for governments to allocate resources effectively while maintaining long-term financial security for an ageing population. The NZ Super Fund's strong returns highlight its resilience in mitigating future fiscal pressures.

A key factor in sustaining fiscal stability is the ability to manage long-term financial security. The NZ Super Fund's consistent growth ensures that the government can allocate resources effectively.

Effective resource allocation is essential for governments to address the needs of an ageing population. The NZ Super Fund's strong returns enable the government to make informed decisions about resource allocation.

The NZ Super Fund's performance is a prime example of how a well-managed fund can contribute to fiscal stability. Its consistent growth is a testament to its strong returns.

The New Zealand Super Fund is overseen by a board of six members, who are appointed by the Minister of Finance.

The board's role is to make investment decisions and ensure the fund's long-term sustainability.

The fund's investment strategy is guided by a statement of investment policy and objectives, which outlines the fund's investment goals and risk tolerance.

The New Zealand Superannuation Fund has a clear mission, purpose, and role, which are all outlined in its legislative mandate. The Fund's mission is to maximise its return over the long term, without undue risk, so as to reduce future New Zealanders' tax burden.

The Fund is managed by the Guardians of New Zealand Superannuation, an Auckland-based Crown entity that has operational independence regarding its investment decisions. This means the Guardians can make decisions without interference from the Government.

The Guardians' legislative mandate includes investing the Fund on a prudent, commercial basis. This involves managing and administering the Fund in a manner consistent with best-practice portfolio management.

Key aspects of the Guardians' mandate include:

The Fund's purpose is to help pre-fund the rising cost of universal retirement benefits in New Zealand. By investing in the Fund, the Government can add to Crown wealth and improve its ability to pay for superannuation in the future.

In New Zealand, the minister can issue a non-binding ministerial direction to the fund's guardians to consider divesting from sovereign bonds if the fund is not investing ethically or in accordance with the sustainable investment framework.

The minister can also send an enduring letter of expectation setting out what responsible and ethical investment might look like, as seen in 2021 when the Labour government required Crown Financial Institutions to seek "zero carbon investment portfolios" by 2050.

The fund's guardians might strengthen the fund's sustainable investment framework by making its language more emphatic, such as stating the fund "shall" rather than "may" take account of international law and the severity of the breach of standards by another state.

Here are some key areas that the fund's guardians might focus on: