The NZ Superannuation Fund (NZS) underperformed its passive reference portfolio last year by almost 2.3 per cent even as strong nominal returns and government contributions took assets under management close to $70 billion.
During the calendar year, the sovereign wealth fund was up about 16 per cent as most asset classes staged a revival, compared to 18.3 per cent for the reference portfolio – an 80/20 mix of shares and bonds, respectively, that acts as one of two NZS benchmarks.
In the December quarter alone the reference portfolio outshone the actual NZS mix of investments by almost 1.8 per cent, likely down to a handful of large cap US stocks skewing index returns.
But since inception in 2003, the NZS blend of active and passive investing has outperformed the reference portfolio by an annualised 1.5 per cent, or almost $16 billion of added value.
The fund has also delivered average annual returns of almost 6.4 per cent above the NZ Treasury bills index, the second NZS investment yardstick.
Acting NZS chief, Paula Steed, said in a release: “The value we create over and above the return on government debt is a very important measurement of our success, so it is satisfying to be able to report that our investment activities have outperformed the Treasury Bill benchmark by $6.44 billion during the past year and by more than $44 billion during the lifetime of the Fund to date.”
Including government contributions of $2 billion, the NZS clocked up net gains of $11.4 billion over 2023 as total assets under management verged on $69.7 billion: the fund’s latest ticker reading shows almost $70.3 billion.
Over the last 20-odd years the government has tipped in about $27.5 billion to the fund, clawed back almost $9.7 billion in tax to leave net contributions of just above $16 billion.
The current National-led government has committed to continuing contributions to the NZS.
Also last week, KiwiSaver provider, Generate, marked another milestone in its 12-year journey, reporting $5 billion in funds under management.
The boutique scheme launched in 2013, led by Henry Tongue, who was formerly a portfolio manager at the now-defunct Huljich KiwiSaver (bought by Fisher Funds in 2011). Generate was initially part-funded by former Fisher chief investment officer, and latterly founder of Hobson Wealth, Warren Couillault, who has since left the share register.
Since launching into an institutional-heavy market, Generate has gained a loyal KiwiSaver following among non-aligned financial advisers as well as boosting sales via an in-house advisory team of 37.
Tongue said the manager has relationships with about 800 external advisers.
While the vast majority of Generate assets under management are in its KiwiSaver scheme, the firm has released a handful of standalone unit trusts including, most recently, two internal equities strategies covering Australasian equities and a ‘thematic’ global shares fund run by former Kiwi Wealth portfolio manager, Nathan Field.
All up, Generate has a staff roster of 110 including the 37 advisers and a nine-strong investment team, who manage $4.5 billion internally, Tongue said.
He said the business has pared back its external managers (only used for global equities) over time with $500 million now split between a few firms such as the Nicholas Bagnall-run Te Ahumairangi fund and T Rowe Price.
(As an aside, the Te Ahumairangi retail portfolio investment entity recently hit $250 million, adding to its $2 billion plus institutional mandate with the Accident Compensation Corporation fund.)
Generate has also diversified a little into private equity and social housing investments.
According to Tongue, the firm is now developing systems to improve “ongoing conversations with our roughly 140,000 members about fund type, contribution rate and what that will mean for them in retirement”.
“We want to educate and empower them to make smart decisions with their KiwiSaver,” he said.
Over the 12 months to the end of March last year, Generate reported a net profit after tax of about $3.4 million on revenue of almost $44.7 million and operating expenses of $39.7 million. The business also paid a dividend of more than $3.2 million after skipping the shareholder pay-out in the previous year.