Board conversations are different these days, according to NZ Superannuation Fund (NZS) chief, Jo Townsend.
“Ten years ago it was all governance, process and controls,” Townsend said. “Today, every meeting is about tech, AI and data.”
AI wasn’t just a high-level talking-point this year but also (probably) the main reason the $95 billion sovereign fund missed its reference portfolio by that much over the 12 months to June 30 this year.
In provisional results handed down last week, the NZS reported returns of 14.17 per cent after costs compared to 14.27 per cent for the notional reference portfolio.
Townsend said the fund had stayed surprisingly close to the reference portfolio given its well-diversified style was up against a market where just a handful of AI-influenced US stocks dominated returns.
“To be only 10 basis points off the reference portfolio is a really good outcome under the circumstances,” she said.
“Of course, we’d like to outperform the reference portfolio every year but it’s unlikely we’ll be able to do that.”
Now boasting an almost 23-year investment history, the NZS has, at any rate, batted well above the long-term average, adding about $22.6 billion over the reference portfolio since inception.
Formally introduced as a performance target in 2010, the reference portfolio has seen a few minor tweaks in subsequent five-yearly reviews while remaining as a broad 80/20 mix of indexed growth and income assets.
Townsend said NZS has kept the current reference portfolio settings – 75 per cent global equities, 5 per cent NZ shares and 20 per cent international fixed income – following the latest review completed earlier this year.
But the fund continues to make changes in the real portfolio.
During the financial year, for instance, NZS sold some of its local hotel assets while after balance date the fund agreed to sell its 50 per cent stake in Fidelity Life to rival Partners Life (owned by the Japanese giant, Dai Ichi Life).
Partners Life will stump up $630 million for Fidelity: NZ paid $100 million for its original 42 per cent share of the local life insurer in 2017.
The circa $315 million Fidelity proceeds would either be ‘recycled’ into other active opportunities, Townsend said, or parked in the passive reference proxies in the interim.
“We’re constantly on the lookout for new ideas,” she said.
The NZS investment team has also seen significant changes over the last couple of years. Co-chief investment officers (CIOs), Brad Dunstan and Will Goodwin, have restructured the teams under asset-based reporting lines while retaining a ‘total portfolio approach’ style.
Some 20 NZ investment team members departed during the 12 months to June 30 this year including 13 redundancies: during the previous financial year, the fund cut its tech-head count by 20, with 13 made redundant.
Total NZS full-time employee numbers fell to just under 200 as at the end of June, 2026, down from almost 240 two years prior.
The slimmed-down fund is also preparing for a different investment regime ahead, marking down its expected long-term average annual return to 7.2 per cent from 7.8 per cent.
After costs, NZS has averaged returns of almost 10.3 per cent since making its first market foray in November 2003.
“The fund has performed well over the last 20 years,” Townsend said. “But we’re in a very different environment now even compared to the past five to 10 years… our operating model needs to keep evolving.”