The now $6 billion Government Superannuation Fund (GSF) delivered above-budget returns during the 12 months to June 30 despite falling more than 4 per cent off its reference portfolio.
According to the just-released GSF annual report, the fund “returned 13.5% in the year to 30 June 2026, net of investment management fees and before tax, far in excess of the 5.6% return of New Zealand Government Bonds but 4.4% behind the Reference Portfolio return of 17.9%”.
The latest performance undershoot leaves the Annuitas-run fund just 0.1 per cent below par versus the passive reference portfolio (comprising 70 per cent global equities, 10 per cent NZ shares and 20 per cent international bonds) since inception in 2001.
While it remains ahead of the benchmark for the five years to June 30, the GSF lags over the one-, three- and 10-year periods.
Private equities (both global and NZ) proved the biggest drag on performance during the latest financial year, returning under half the respective targets: the asset class represents more than 18 per cent of the GSF portfolio, including almost 16 per cent allocated to the global sector.
In an independent review by Geneva-based consultancy, Pnyx, released this July, the GSF was advised to restructure the private equity portfolio, especially the multi-manager global component largely run by Stepstone,
“This should not be framed as a sudden internalisation of the full [global private equity] programme, but as a staged review of implementation options,” the Pnyx review says. “A practical route would be to allocate only a fraction of the current FoF fee budget to strengthen internal oversight and manager selection capability, supported by selective external advice where needed.”
Most other asset classes were at or above target for the financial year, although the GSF asset-tilting efforts knocked 0.8 per cent off returns over the 12 months.
“… the fund’s Dynamic Asset Allocation programme maintained a tilt away from Global Listed Equities, due to the high valuations, which decreased relative performance,” the report says.
While the GSF slipped behind the reference portfolio for the 12-month period, the total annual investment return of more than $800 million was about double the forecast.
By June 30, the fund topped $6.2 billion against the projected $5.8 billion, adding somewhat to the core GSF aim of offsetting defined benefit liabilities for almost 43,000 current and former government employees.
Total costs hit almost $56.5 million over the 12 months to June 30 against a budget of $53 million, exceeded largely due to higher-than-expected underlying manager performance fees: last year the GSF booked expenses of close to $61.2 million.
Investment management and custody costs blew out to $46.5 million (against budget of $42 million) but the fund reduced in-house operating costs year-on-year to $4.2 million from about $4.5 million in the 2025 report and well below the forecast $5.1 million.
During the financial year, GSF and the other Annuitas-managed government investment vehicle, the National Provident Fund (NPF), adopted a common board membership: the move also extended to the separate Annuitas corporate entity.
GSF chair, Anne Blackburn, says in the annual report that the governance rationalisation “has already brought considerable efficiencies in the conduct of board business across GSFA, NPF and Annuitas”.
“We are now giving considerable attention to what further efficiencies can be gained from the three entities working more closely together,” Blackburn says.