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NZ Super Fund rides global share surge

Heavy exposure to international share markets has enabled the New Zealand Superannuation Fund to post its second best annual return.

The fund made an annual absolute return of 15.45% in 2010 – second only to its 19.20% return in 2006.

Although the fund hasn’t published returns on the various parts of its portfolio, the all-country MSCI for shares rose 10.4% in 2010 while the US broad market was up 15.1%. The NZX-50 index was among the poorer performers, returning just 2.4%.

The fund now totals $18.21 billion, after adding a net $2.68 billion in the past year. The absolute return is before tax of $1.53 billion, which the fund counts as a return to the Crown. On that basis the total return for the six months to December was 17.8% and took the annualised return since inception 2003-04 to 7.41%. (The fund reports annually on June 30.)

An asset allocation breakdown shows 60.1% of the fund is in global equities and worth nearly $11 billion. The New Zealand share portfolio is worth another $950 million and makes up 5.2% of the total fund.

But this strong performance is not making individual Kiwis richer because of their conservative investing habits.

This week’s ASB investor confidence index for December showed just 6% of New Zealanders rate shares as offering the best return – ranking them well below cash and property.

The ASB says nearly times as many (21%) believe term deposits offer the best return followed by rentall property (14%) and bank savings (12%), KiwiSaver (11%) and managed funds (9%). (The remaining 27% had no preference.)

The NZ Super Fund holds 11.5% – or a fifth compared with shares – of its portfolio in fixed interest.

The Mercer survey of KiwiSaver funds performance, also issued today, shows how much investors are giving away by ignoring shares.

Mercer says KiwiSaver growth and balanced funds (heavy in shares and property) did best with median returns of 7.1% in 2010, while conservative funds had 6.1% and default funds 5.9% for the year.

(Note: An earlier version of this story reported the annual return was 17.8% but this has been corrected to six months to reflect the fund's annual year ending in June 30.)

More by Nevil Gibson

Comments and questions
1

It would be interesting to know what the return from inception would have been if all money was in 90 days bills