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Defined Contribution

New Zealand Super reports active management boosts fiscal-year returns

Sovereign wealth fund also reveals it restarted a securities lending program

The existing New Zealand flag flies in Auckland, New Zealand, on Wednesday, March 2, 2016. New Zealanders will vote in a change-of-flag referendum from March 3-24 on whether to adopt a new design. Photographer: Brendon O’Hagan/Bloomberg

New Zealand Superannuation Fund said its active management activities contributed strongly to the NZ$35.7 billion ($25.6 billion) Auckland-based sovereign wealth fund's 20.71% gain for the fiscal year ended June 30.

Such activities — from moving beyond the fund's 80% equity-20% fixed income reference portfolio to add real assets to using futures and derivatives to sell overpriced markets or buy underpriced ones — accounted for 4.37 percentage points, or more than 20%, of the year's gains, according to the annual report the fund released Tuesday.

Of the total, the fund's "strategic tilting" program of adding broad exposure to undervalued equity markets and lowering exposure to overvalued markets, accounted for 2.23 percentage points, or just over half, of total gains.

In other developments, New Zealand Super said it launched a securities lending program in June, as the fiscal year drew to a close, to "generate additional return and to help manage collateral in the most efficient manner possible," the annual report said.

That marked the fund's second go-round with securities lending. The timing of its first securities lending program, in 2007, proved problematic. The fund shut down the program in 2009 after suffering collateral losses.

The annual report said New Zealand Super hired State Street Bank as its agent overseeing the securities lending program.