Super Fund value falls in ‘challenging’ year

‘‘This year is certainly proving to be a challenging one for markets.’’

Recent equity market conditions have caused the NZ Super Fund’s value to drop by $2 billion since June last year and there is an expectation the performance of sovereign wealth funds globally will deteriorate in the coming year.

In its latest update, the Super Fund said the fund’s value stood at $57b, which was down from $59b at the end of the last financial year, which ended on June 30, but was around the same level it was at the end of April 2021. ‘‘This year is certainly proving to be a challenging one for markets,’’ the update said.

Established in 2001 by the Labour Government, the fund was championed by then minister of finance Sir Michael Cullen to help pay for the future cost of providing universal superannuation.

In the 2030s, the Government will begin to withdraw money from the fund to help pay for superannuation. The fund describes itself as a long-term, growth-oriented, global investment fund. It is expected to peak in size in the 2070s.

The latest update said the fact that the fund was not due to start paying out to cover superannuation costs until the early 2030s meant it was well positioned to take advantage of current market conditions.

‘‘As in previous market downturns,

NZ Super Fund update

we are looking to make the most of our long-term horizon, investing in a contrarian style and buying assets when we consider them to be cheap.’’

As at the end of March, the fund had returned 10% a year since its inception and had generated more than $40b more than the cost to the Government of contributing to it.

Global SWF, which tracks more than 400 sovereign wealth and pension funds, said it expected sovereign fund performance figures generally to deteriorate next year.

A recent Global SWF report comparing investment returns across 20 sovereign wealth finds and 20 pension funds, over the past six years, ranked the NZ Super Fund first among sovereign wealth funds and third out of all 40 funds covered, with a near 12% return over the period.

The NZ Super Fund said March saw some recovery in equity markets, as worst case scenarios were avoided, but sold off again during April and early May.