The NZ Super Fund losers and gainers
Arvida the big gainer with fund increasing holdings by 907 per cent
Aged care operator Arvida, property group Stride, telco infrastructure firm Chorus and milk marketer a2 are among the New Zealand stock exchange-listed firms enjoying increased investment from the New Zealand Super Fund.
Data obtained by BusinessDesk from the fund, which invests in funding superannuation payments, showed between June and December 2023, it boosted its shareholdings in a2 by 27 per cent, Chorus by 44 per cent, Stride Property Group by 101 per cent, and Arvida by 907 per cent.
It also increased its stake in property company Argosy and retailers Hallensteins Glassons, as well as struggling outdoor retailer KMD, owner of the Kathmandu brand.
The Super Fund had $85.8 million invested in a2 at the end of December.
It had much smaller holdings in Arvida, valued at $15.7m, Stride at $7.4m and Argosy at about $690,000 at the end of 2023.
On the flipside, the fund whittled down its holdings in the New Zealand stock exchange (NZX) operator NZX Limited in the six months to December 30, and insurer Tower, as well as small holdings in Air New Zealand and meal kit company My Food Bag.
The fund had $1.3m invested in NZX shares by the end of December, with the number of shares held falling 43 per cent compared to June 30.
It had a little more than $1m in Tower shares on December 30, and the number of shares held in the company from June 30 fell by 45 per cent.
The fund also divested about $3m it had in wine company Delegat and about $190,000 it had in Vector.
While the fund slashed its NZX investment, it only trimmed the number of shares it owned in the Australian securities exchange (ASX) to hold $3.7m worth of ASX shares by December 30, a fall of 0.3 per cent from June.
With OCR cuts just around the corner, companies like Chorus could do well over the coming year. Craigs Investment Partners investment director Mark Lister
The largest NZX investment
The Super Fund allocates 5 per cent of its investment portfolio to NZX shares. Overall, the fund had more than $2.5 billion invested in NZX companies in December.
Most of its NZX investment went into healthcare companies (29 per cent or about $746m), followed by utilities (26.47 per cent or $681m) and industrials (21.21 per cent or $545m).
Its largest NZX shareholding is in Fisher & Paykel. At December 30, it had $352.5m invested in the appliance and healthcare tech company. The number of shares held by the fund increased by 14 per cent from June 30 to December 30.
The number of shares it owned in infrastructure investor Infratil increased by 8 per cent across the six months to a value of $225.1m.
It held $201.1m worth of energy firm Contact’s shares by December 30, with the number owned also rising by 8 per cent since June 30.
Fletcher Building also saw an 8 per cent increase in shares held by the fund, with $110m invested by the end of December.
The fund wouldn’t comment on its NZX share movements. “We allocate to New Zealand shares through two active and one passive internal investment mandates . . . and two active local external managers, Devon Funds Management and Mint Asset Management,” the fund said in its 2023 annual report.
Active versus passive
The fund said it believed its deep understanding of the New Zealand market and a relatively high tolerance for volatility provided the potential to add value by stock picking.
“This belief has been borne out by the performance of our in-house and external managers measured against the benchmark NZX50 index over the lifetime of the fund, with $250m of value added since inception.”
Its investments in overseas sharemarkets were passively selected, though the fund was an active owner of the companies it holds, it said.
Its top 50 investments included Apple, Microsoft, Google owner Alphabet, chip maker Nvidia, and Amazon, with Fisher & Paykel being its seventh-largest investment overall.
Telsa and Facebook owner Meta made its top 10, with the final spot taken by semiconductor company Broadcom, while the percentage of Nvidia shares held increased by 10.4 per cent, Broadcom by 37 per cent, Amazon by 16.5 per cent and Tesla by 19 per cent. Its shareholding in Meta fell by 11.2 per cent.
The fund aims to return at least 7.2 per cent per annum across any 20-year moving average period.
“This is our long-term performance expectation.”
At February 29, 2024, the fund had an annual rate of return of 9.9 per cent before New Zealand tax and after costs. It had added $16.2b in value compared to passive benchmarks with an overall fund value of more than $70b.
A2 back on track
Craigs Investment Partners investment director Mark Lister said he understood the fund’s increased exposure to a2 Milk.
“After a difficult few years, it seems to have got itself back on track, and the result it released in February was very good. Infant formula market share gains were impressive (in a declining market) and the losses in the US reduced. Full-year revenue guidance was increased as well. It’s the top performer in the NZX50 so far this year, having risen more than 30 per cent.”
Lister said Chorus had been a steady performer over the past 18 months, but higher interest rates had likely weighed on the firm, and that looked set to change.
“With OCR cuts just around the corner, companies like Chorus could do well over the coming year.”
He said Stride and Arvida both had it tough these past couple of years, suffering as commercial and residential house prices have struggled under high interest rates.
Stride would start to look more attractive to investors as interest rates fall, as will the listed property sector generally, and house prices had stabilised, which should make for a better backdrop for Arvida, too, given that its long-term growth prospects were still intact, Lister said.
“As for NZX and Tower, they have been facing their own headwinds, and the fund has obviously taken a more cautious view on their immediate prospects.”