The entities managing state-owned defined benefit schemes during their sunset years plan to co-operate more closely following a tri-board level investigation, according to the Government Superannuation Fund (GSF) 2025 annual report released last week.
Anne Blackburn, GSF chair, says in the report that the board carried out a “comprehensive long term strategic options review” along with counterparts in the National Provident Fund (NPF) and Annuitas to explore ways to “improve efficiency of governance, Fund and schemes management”.
“Having completed the long-term strategic options review, the Board is now focused on how we can work more closely with NPF to achieve greater efficiencies across both organisations,” Blackburn says. “We are in dialogue with the Minister of Finance and the Treasury regarding the potential form of this closer cooperation.”
Annuitas, headed by Tim Mitchell, provides a range of investment and administration services to the NPF and GSF under a joint venture agreement but the two funds operate separate boards with different objectives.
As reported in August, the $1.7 billion NPF saw average returns for the 12 months to March 31 halve year-on-year to about 6 per cent across a range of 1.2 per cent to 9.1 per cent in the eight (now seven) industry-based schemes it serviced during the period.
The less disparate GSF returned 12.8 per cent for the 12 months to June 30 this year net of fees but pre-tax compared to 14.3 per cent last year. The GSF also caught the June quarter market upswing following the torrid first three months of 2025 that ended the NPF financial year.
“This is a strong outcome relative to the 6.4% return for New Zealand Government Bonds and was slightly ahead of the 12.7% return for the Fund’s benchmark Reference Portfolio,” Blackburn says in the report.
Over the previous annual period, the GSF was about 0.6 per cent behind the reference portfolio, which it also lags for the three years to June 30 this while remaining “comfortably ahead” in the five-year performance statistics.
“We aim to add approximately 1.0% p.a. on average over ten-year periods from alternative return sources, active managers and the strategic tilting programme,” the GSF report says. “Added value in the last ten years was 0.0% p.a. versus the Reference Portfolio so fell some way short of our long-term target.”
Since inception in 2001, the now $5.8 billion plus fund returned 7.8 per cent annualised after fees versus 7.7 per cent for the reference portfolio – a notional index blend of 70 per cent global equities, 10 per cent NZ shares and 20 per cent international fixed income.
“During the year, active managers of global listed equities and bonds contributed positively to the Fund, outperforming their benchmarks,” the annual report says. “However, the Fund’s global private equity investments detracted material value relative to the Reference Portfolio as they lagged their public counterparts. It was a mixed year for the Fund’s investments in alternative assets; catastrophe risk significantly outperformed its funding source whereas life settlements lagged behind.”
The GSF list of external managers remained stable during the year with the exception of Elementum Advisors joining the list of 24 mandates in June this year for a catastrophe bond allocation. Elementum has been a cat bond manager for the NZ Superannuation Fund since 2010.
Despite hitting most of its key performance indicators for the year, the GSF missed a cost global benchmark with investment expenses ending “6.1 basis points above the peer median” for the year.
Total GSF costs landed just above $61 million for the 12 months to June 30 against a forecast of almost $42.5 million.
“The main reason for the higher than forecasted number is the higher performance fees earned by some Investment Managers this financial year,” the report says. “These fees are linked to the increase in Investment asset values in the Fund which, in the current year, increased significantly.”
Established to defray the costs of the long-closed government employee defined benefit pension schemes, the GSF covers slightly less than half of the long-term liabilities: as at June 30 this year, the state is still on the hook for almost $6.5 billion of pension payments (down from about $6.7 billion in 2024).
The scheme has about 41,500 members with only 2,674 still contributing.