Negative year for Super Fund

By AARON LIM - BusinessDay.co.nz | Wednesday, 24 September 2008

The New Zealand Superannuation Fund said today it expected its investments to have declined in value over the June financial year with the "dramatic and unsettling" financial environment denting performance.

Super fund chief executive officer Adrian Orr attributed the negative returns to the widespread decline in global share prices in recent months thanks to the ongoing global financial crisis. The super Fund will release its results on Monday.

Orr also acknowledged the Fund had invested in the troubled US financial sector.

He said the Fund's exposure to the most troubled financial shares such Lehman Brothers, American International Group, Morgan Stanley, Goldman Sachs, Bear Stearns, Merrill Lynch and Britain's HBOS, was less than 1 per cent of Fund's investments.

 "The New Zealand Superannuation Fund holds a broad portfolio of global shares, which includes financial institutions. Our direct exposure to financial sector shares has been less than 10 per cent of the Fund," Orr said.

"Our direct exposure to the Bear Stearns and Lehman Bros collapses, and the AIG bailout, was less than 0.1 per cent of our Fund," Orr added.

Despite warning that the strong positive returns of the previous years would not last, the Fund said it remained comfortable its performance would remain well in line with expectations stated at its inception in 2003.

While Orr remained confident of the long- term performance of the Fund, he warned that:  "We do not under-estimate the seriousness of the current financial and economic challenges".

The New Zealand Superannuation Fund, which commenced investing at the end of September 2003, was designed to provide for some of the future cost of New Zealand superannuation.

As at 31 May 2008 the value of the Fund was $14.7 billion. The Fund is expected to grow to around $109 billion by 2025.