The National Provident Fund (NPF) has reported a $40 million loss over the 12 months to March 31 with assets under management falling more than 2 per cent to almost $1.7 billion.
According to the just-published NPF annual report for the 2022/23 period, the funds managed by Annuitas in the Global Asset Trust (GAT) saw net valuations drop by almost $85 million year-on-year offset by more than $44 million gains from dividends, interest and other revenue.
In an accompanying letter, Ed Schuck, NPF chair (and Fidato Advisory principal), says investment returns “for the NPF schemes for the 2023 financial year were weak”.
“The prices of long-term bonds fell as yields rose in anticipation of inflation and tightening global monetary conditions,” Schuck says. “Equity markets were flat when measured in NZ dollars and over the whole year. Overall, NPF’s investment managers performed in-line with their respective benchmarks.”
The negative returns in the latest reporting period followed a good run for the NPF, which reported respective gains of almost $51 million and $402 million for the 2022 and 2021 years.
Representing eight underlying government-guaranteed closed pension schemes, the NPF invests via a small subset of managers used for the Annuitas-managed Government Superannuation Fund.
While each scheme has a different asset allocation and manager mix, the full NPF list includes: Arrowstreet, Lazard and T Rowe Price for global equities; Harbour and Devon for Australasian shares; Brandywine Global, PIMCO and PGIM running international fixed income with Macquarie Asset Management NZ (now Mercer) in charge of local bonds; and, BNZ providing a currency overlay.
During the reporting period the NPF board terminated Russell Investments from a global equities transition mandate, marking the only change over the 12 months. In the previous couple of years, the fund has pared down the manager menu, cutting quant specialist, AQR, and opportunistic credit firm, Marathon Asset Management.
The NPF board also saw two changes over the reporting period with Mosaic Financial Services Infrastructure principal, Tracey Berry, and MinterEllisonRuddWatts partner, Lloyd Kavanagh, filling vacancies left by Daniel Mussett and Stephen Ward.
NPF scheme numbers have halved from the 16 established in the 1990s as the government sought to reorganise a slew of associated employer super funds (airlines and meat industry, for example) that carried a pension guarantee from the state.
Schuck told members in the letter: “This activity is likely to give rise to further rationalisation of the NPF schemes over time, with members being consolidated into the larger NPF schemes to minimise overall reporting and administration costs.”