Super Fund down $10b in turmoil
The value of the New Zealand Superannuation Fund, which was set up to pay for future superannuation payments, has fallen by $10 billion or 22 per cent since the start of the year as a result of the coronavirus-led sharemarket downturn.
The fund boasted less than a month ago that it had started 2020 with $47b in the kitty after recording a bumper 21 per cent pre-tax return on its investments in the 2019 calendar year.
The Super Fund said then that it expected ‘‘a slightly less turbulent market environment in the near term following an eventful 2019’’, but chief executive Matt Whineray said it had instead experienced the most volatile market environment since the global financial crisis in 2008.
The majority of the Super Fund’s investments are passive investments in foreign shares, which have in general been harder hit than stocks on the NZX, and overseas bonds, many of which are denominated in United States dollars.
Although it has been weighing up a change, the fund hedges the bulk of its investments in New Zealand dollars, meaning it will not have seen much of a silver lining from the decline in the kiwi relative to the greenback.
Whineray took heart from the fact the fund had achieved a positive annual return averaging 8.6 per cent since its inception.
The recent fall in the fund’s value would not blunt its commitment to pursuing a role in the Auckland Light Rail project to connect Auckland Airport to the city’s centre, or other domestic and international investment opportunities, he said.
The Super Fund is understood to have proposed its involvement in a public-private partnership to build and run the light rail network for 50 years.
Whineray said it was ‘‘largely unavoidable’’ that a growthoriented portfolio such as the Super Fund’s would fall in the current period. But as a long-term investor with no substantial withdrawals expected until the 2050s, the fund was well placed to withstand the ‘‘paper losses’’ of more recent times and its investment strategy had been designed with that in mind, he said.
‘‘By taking on the risk associated with growth assets, which we do in order to generate longterm returns, the Super Fund accepts the risk markets may experience sharp drops in value. The Super Fund has the ability to ride out and potentially benefit from these short-term movements.’’
ACC has also been hit, but to a lesser extent. It was holding investments worth just under $45b at the end of September, but chief financial officer John Healy believed their value would since have fallen by about $3b.
ACC reported an $8.7b ‘‘paper’’ deficit last year after lower interest rates forced it to recalculate the cost of funding its current injury claims.
But Healy believed its ‘‘outstanding claim liability’’ had also fallen by $3b since September, meaning no increase in the gap between its assets and liabilities.
‘‘There have been significant movements in financial markets in recent weeks. Despite this volatility, New Zealanders can be assured that ACC is able to continue to cover and support those who are injured,’’ Healy said.
Whineray said the Super Fund was taking health precautions with its own staff, and would close its offices to visitors from tomorrow.