The $50 billion Accident Compensation Corporation (ACC) fund has turned in an above-benchmark performance after costs for the first time in two years in the inaugural annual period reported on by new chief investment officer, David Iverson.
According to the just-released ACC annual report, the fund was up 9.1 per cent after expenses (of 0.15 per cent) for the 12 months to June 30, equating to 0.28 per cent over the bespoke composite benchmark.
During the previous two financial years, the fund finished between 10 and 20 basis points below-benchmark after costs despite booking above-budget nominal returns.
Overall, the ACC investment strategy delivered $4.5 billion in the latest 12-month period, the report says, “underpinned by strong returns from our fixed interest and global equity portfolios”.
However, only the cash and fixed income portfolios (excluding NZ inflation-linked bonds) ended above-index for the year: the ACC local and global bond portfolios returned about 1.1 per cent and 2.2 per cent, respectively, over their benchmarks.
More than 60 per cent of the fund is held in NZ bonds, split about equally between nominal and inflation-linked securities: the ACC owns about $14.5 billion of inflation-linked bonds (or about half of all the amount on issue) with the portfolio about 17 basis points behind its index for the year.
The almost $9.2 billion global equities portfolio returned just over 17.7 per cent the for the year, remaining the best-performing ACC asset class overall but 6 basis points shy of benchmark.
Private markets (almost $2.7 billion) increased some 13.1 per cent in the 12-month period, although the asset class is unbenchmarked in the report.
Since inception in 1992, the fund has returned an annualised 9.24 per cent gross.
“Every $100 invested in 1992, is now worth $1,848 and our investment portfolio is now $51.1 billion, an increase from $48.9 billion last year,” the report says.
Iverson, who formally succeeded Paul Dyer as CIO near the end of the financial year this June, says in the report that active management continues to add value to the ACC fund.
“Our active management performance added 0.43% to investment returns over and above the benchmark return [in the 2024/25 year] and continues the outstanding performance of the fund exceeding benchmark returns in 31 years over its 33-year history since its inception,” he says.
The fund manages about 80 per cent of assets in house with the remaining 20 per cent of outsourced investments mainly in global equities
As of last year, ACC international equity managers included: Allspring; Arrowstreet; Alliance Bernstein; Harding Loevner; Intermede; Marathon; Orbis; and, Te Ahumairangi Investment Management – the firm led by former ACC CIO, Nicholas Bagnall.
PIMCO, Elementum and Robeco serve as underlying managers for global bonds.
In July this year, the fund also received glowing reviews in its first-ever independent probe, carried out by WTW (Willis Towers Watson).
Despite the WTW kudos, Iverson says in the report that “we also acknowledge that we must continue to adapt to the changing environment to ensure we continue to deliver strong long-term investment returns into the future in a cost-effective manner”.
The under-pressure no-fault national accident insurance scheme was subject to two other independent probes during the financial year – a yet-to-be-published investigation of ACC rehabilitation practices commissioned by the Minister and a board-prompted ‘culture’ review released last month.
Government has raised concerns about the ongoing viability of the ACC scheme following a recent blow-out in its outstanding claims liability (OCL), which has expanded on the back of generally rising costs and a court decision opening up the system to victims of sexual abuse.
As at June 30 this year, the OCL stood at “$63.6 billion, while the value of our Investment Fund was $51.1 billion”, the annual report says.