NZ Super overhauls portfolio

The NZ$16 billion (US$12.07 billion) New Zealand Superannuation Fund, Auckland, has upped its exposure to global equities by NZ$2.2 billion following a portfolio review earlier this year.

The fund increased its global share holdings, achieved mainly via derivatives, in line with the updated strategic asset allocation benchmark, now dubbed the “reference portfolio,” according to a fund spokesperson.

As well, the fund dumped NZ$700 million of commodities investments, fetched about NZ$1 billion after offloading 700 corporate bond holdings, and sold down NZ$500 million in listed property as it transitioned to the new ‘reference portfolio' management style.

“The reference portfolio took a number of months to move from the initial design to go live,” the spokesperson said.

The reference portfolio is composed of the “cheapest passive exposure” to four broad asset classes currently weighted: 70% global equities; 5% New Zealand equities; 5% global listed property; and 20% fixed interest.

Under its 2007 SAA review, the fund's benchmark included global equity exposure of about 60%; 7.5% New Zealand equities, 12% property, 25% fixed interest and 5% alternative assets.

However, the reference portfolio serves as a gauge of the fund's performance rather than a strict investment guideline with the fund free to pursue a number of active strategies to achieve its stated goal of beating the NZ Treasury Bill rate plus 2.5% over rolling 20-year periods.

The superannuation fund also has argued for an earlier resumption of government contributions to the fund than the expected restart date of 2020. The government halted contributions to the fund in 2009 citing fiscal constraints, promising to restart contributions when the budget returned to surplus.

“All else equal ... it is desirable for the Crown to resume funding sooner rather than later,” the system stated in its Reference Portfolio document. According to the fund, resuming contributions this year could add more than NZ$20 billion above the benchmark compared with starting Crown funding in 2020.

David Chaplin writes for Investment I&T News, Sydney.