Weekend Edition: NZ Super Fund – time on their side
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What makes NZ Super Fund one of the world’s top‑performing sovereign wealth funds?
They are one of the best performing sovereign wealth funds in the world, if not the best performing. So what is the secret behind NZ Super? How do they consistently produce strong returns in an increasingly volatile investment environment? And can they keep doing it? All from New Zealand. I talked to Brad Dunstan, their chief investment officer today, to try and understand more about them and their secret source. That's this week. The morning call from NEV with Phil Dobby. The weekend edition. Well it's always interesting to get a fund manager's take on the world right now, wherever in the world they are, and Brad Dunstan is in New Zealand. He is Chief Investment Officer of the NZ Superfund. Not a private scheme.
This is a sovereign wealth fund investing government money now to cover superannuation funds of the future. So Brad, obviously the challenge is however much money you can manage to magic up. through wise investments. I mean, the ultimate issue is there's too many old people, so we're going to have fewer people paying in to to add to the fund uh and more people demanding to see a pension at the end of this. So tell me a little bit about, you know, how big the fund is, how is it growing by contributions, but also uh in the growth in the assets that you've invested in, because as I said in the introduction, you are uh w one of those offering the best returns globally.
Yeah, hi Phil. Uh so New Zealand Superfund uh was initially set up by an act of parliament in two thousand and one. That was recognition, I think, by policymakers that come around two thousand and fifty, uh, about one in five New Zealanders will be over the age of sixty five, uh, which is the universal pension age here in New Zealand. And so the fund was originally set up to help smooth a tax burden of future New Zealanders uh contributing to pay. or universal pension. Uh so so it is a It is an issue, the the demographics uh around the world of, you know, people living longer and needing to give people uh that certainty in their retirement. Um so the fund is is twenty one years old uh currently and uh you know, we have been investing over that time.
Uh the f Bund returns have have been good as as you have suggested. We're We've averaged uh around ten percent per annum, uh compounded over those twenty years. Uh and we've also take on active risk over and above our sort of benchmark, um, and which we've contributed about one
just
over one percent
per annum. Right. So when you talk about a benchmark, who's who's setting that benchmark?
So within the New Zealand Fund we have uh a reference portfolio construct. Uh that reference portfolio is determined by the board and it's set once every five years. Uh the reference portfolio consists of listed uh instruments, securities, and it is eighty percent Equities and twenty percent uh fixed income. Um the reference portfolio really X as a couple of sort of lenses for us. Number one, it's obviously a benchmark, uh in which we can compare the returns of the actual portfolio. Uh it is also an expression of the board's risk appetite. So, you know, if the board are saying, hey, we want a eighty percent equity allocation to the reference portfolio, that's obviously quite a growth mindset uh portfolio.
And that that really goes into and leans into our long term horizon because the fund is here for perpetuity. Um
Well anyway I mean you're right, that that does seem like a h you know, relatively high risk benchmark. So performing better than that would be quite something, wouldn't it?
Yeah, absolutely. I I guess, you know, m traditionally you'll feel a lot of funds are around the sixty forty uh sixty quiz, forty bonds. Uh given our long horizon. You and we can take on and get compensated for that extra active risk. Um, so, you know, uh it is something where we feel With a long term horizon. investors can take more risk and and be rewarded uh for that. So
And that's not a problem for a sovereign fund, because I w wanna would have wondered whether actually you'd have to play it safer as a as a sovereign fund over a private fund because it's taxpayers' money you're ultimately dealing with.
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Chapters
4 chapters
1
What makes NZ Super Fund one of the world’s top‑performing sovereign wealth funds?
0:01–5:23
2
How big is the fund and how has its asset base grown since its 2001 inception?
5:23–13:56
3
What is the fund’s reference‑portfolio benchmark and how does it guide active risk‑taking?
13:56–21:01
4
Why does having “time on their side” give NZ Super a long‑term investment edge?
21:01–26:53