apr-11.pdf (2.07 MB) - Crown Ownership Monitoring Unit

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New Zealand Superannuation FundCHAIR » David MayBOARD » Craig Ansley, StephenMoir, Catherine Savage, MarkTume, Gavin WalkerCHIEF EXECUTIVE » Adrian OrrActivitiesNZSF pre-funds part of thefuture cost of New ZealandSuperannuation, by investinggovernment contributions andthe returns on that investmentover the long term. By doing so,the Fund is designed to smooththe tax burden of the cost of NewZealand Superannuation betweengenerations of New Zealanders.The Fund is managed by a<strong>Crown</strong> entity, the Guardians ofNew Zealand Superannuation.Financial performance measures$m 2007 2008 2009 2010 2011 5 YearFunds Under Management (FUM)Opening FUM 9,864 12,973 14,212 13,688 15,656 9,864+/- Investment returns 1,619 (716) (3,201) 2,086 3,902 3,690+/- Tax* (559) (148) 435 (368) (906) (1,546)+/- Cash inflow/(outflow) 2,049 2,103 2,242 250 0 6,644Closing FUM 12,973 14,212 13,688 15,656 18,652 18,652Returns & Risk% paReturn** 14.6% (4.9%) (22.1%) 15.5% 25.1% 4.2%Expected return*** 9.7% 10.2% 8.0% 5.1% 5.4% 7.7%Passive benchmark 13.1% (4.7%) (18.3%) 14.6% 19.5% 3.8%Fund risk (volatility****) 14.3%Passive benchmark risk 13.6%Notes:* Changes in reserves netted off to tax** Before tax and after investment management fees*** Treasury Bills + 2.5% pa**** Annualised standard deviation of quarterly returns. Indicative of expected variability of the return in any one yearAsset allocation – past five years% FUMThe Guardians have a duty toinvest the Fund on a commercial,prudent basis. The Fund is widelydiversified and is expected togenerate returns on average 2.5%in excess of a portfolio of TreasuryBills. The Fund is managed actively,meaning investment strategies aredesigned to outperform the internalReference Portfolio benchmark.In May 2009 the Governmentdirected the Fund to identify andconsider opportunities to increasethe allocation of New Zealandassets in the Fund.■ Other Alternative Assets ■ Timber ■ Other Growth Assets ■ Property ■ Overseas Equities■ New Zealand Equities ■ Overseas Bonds ■ New Zealand Bonds ■ CashReturn indexReturn index (based at 100 at end 2004/05 Q4)— NZSF — NZ Government Stock — MSCI World Equity (hedged to NZD)page | 60
Fund composition and performanceWith a long-term investment horizon, the Fund hasthe opportunity to benefit from the expected returnpremium from growth assets such as equities and moreilliquid assets such as non-listed equities, timber andinfrastructure.The Fund’s high exposure to growth assets helped delivera strong return of 25.1% over the year, driven by thecontinued rally in global equity markets. The Fund alsooutperformed its Reference Portfolio by 5.6% over theyear. While a large proportion of the value added over theyear resulted from revaluations of the Fund’s non-listedinfrastructure and timber investments, significant valuewas also added from the Fund’s external active managers.The Fund has a long-term expectation of exceeding theTreasury Bill rate by an average of 2.5% pa over time.The Fund is just behind this performance measure sinceinception, with a return of 7.8% pa compared to the longtermexpectation of 8.1% pa.The high level of exposure to growth assets adoptedwithin the Fund tends to generate short-term volatility, ascan be seen in the Fund’s returns over the last five years,ranging from a fall of 22.1% in 2008/09 to a gain of 25.1%in 2010/11.Over the past year the Guardians have implemented amore passive approach to investing in larger listed equitymarkets. They have decided to do this primarily usingderivative securities, with equivalent cash collateral.A portion of this cash is being used to invest in othermarkets with an expectation of producing a higher returnthan the risk-free rate. This strategy involves taking onadditional risk to that of a pure physical passive strategy,where individual securities are purchased in accordancewith their index weights. In particular it introducesadditional credit risk and counterparty risk. The Guardianshave controls in place to manage these risks and theexpected additional risk from the collateral investmentis typically offset at the total portfolio level by adjustingexposures to other market risks.The Guardians’ active investment strategies includeadjusting the Fund’s exposure to various markets(strategic tilting); exploiting opportunities in listed andunlisted markets (capturing active returns); and efficientimplementation of investment exposures (portfoliocompletion). The complexity of this overall strategyhas meant significant staff resources are employed tomanage and monitor the Fund. At balance date theGuardians employed 66 staff. Total employee payments,including financial performance incentives, amounted to$13.5 million in 2010/11.page | 61
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2011AnnualPortfolioReport
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51 Crown Financial Institutions52 A
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topic on CFI risk tolerance (page 4
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Commercial Priority Portfolio Perfo
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Page 39 and 40: Key assumptions and features of the
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Page 70 and 71: Animal Control Products LimitedCHAI
Page 72 and 73: AsureQuality LimitedCHAIR » Janine
Page 74 and 75: Crown Fibre Holdings LimitedCHAIR
Page 76 and 77: Genesis Power LimitedCHAIR » Rt Ho
Page 78 and 79: Kordia Group LimitedCHAIR » David
Page 80 and 81: Landcorp Farming LimitedCHAIR » Ho
Page 82 and 83: Learning Media LimitedCHAIR » Sand
Page 84 and 85: Meridian Energy LimitedCHAIR » Chr
Page 86 and 87: Meteorological Service of New Zeala
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Page 90 and 91: New Zealand Post LimitedCHAIR » Ho
Page 92 and 93: New Zealand Railways Corporation (t
Page 94 and 95: Public TrustCHAIR » Trevor JanesBO
Page 96 and 97: Quotable Value LimitedCHAIR » Phil
Page 98 and 99: Solid Energy New Zealand LimitedCHA
Page 100 and 101: Television New Zealand LimitedCHAIR
Page 102 and 103: Transpower New Zealand LimitedCHAIR
Page 105 and 106: Multiple ObjectiveCompanies
Page 107 and 108: Crown Research Institute TaskforceD
Page 109 and 110: OperationsNZVIF has been operating
Page 111 and 112: Entity AbbreviationsACC - Accident
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Measure Description CalculationShar
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Financial Position Financial Perfor
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The financial data in the 2011 APR
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apr-11.pdf (2.07 MB) - Crown Ownership Monitoring Unit

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