NZ Super Surges in Value

February 16, 2015 by Loch Adamson

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The New Zealand Superannuation Fund had a stellar 2014. The fund grew 13.9 percent over the twelve months to December 31, bringing its overall assets to NZ$27.54 billion ($20.56 billion). CEO Adrian Orr says the fund's heavy weighting to global equities, coupled with a decline in the New Zealand dollar, helped drive these strong returns.

As befits one of the world’s most sophisticated and nimble sovereign wealth funds, NZ Super has done more than simply increase its exposure to global stocks. For example, the fund recently started to cut back on external managers and to make more direct investments. Alongside the Abu Dhabi Investment Authority and the Alberta Investment Management Corp., its partners in the so-called Investment Alliance, the fund has bought into fast-growing U.S. companies developing clean energy solutions, such as California-based fuel cell manufacturer Bloom Energy.

Another recent strategy has seen NZ Super identify investments that will benefit from longer-term trends, such as demographics shifts in advanced economies. The fund has started building a portfolio of retirement villages, and only last month partnered with Wellington, New Zealand-based infrastructure operator Infratil to purchase RetireAustralia, Australia's fourth-largest operator of retirement properties, for a total of A$640.2 million ($521.6 million).

NZ Super has identified more unusual sources of return, too. Like several of its peers, the fund has begun to participate in the direct lending space. In 2014, NZ Super provided financing of around €160 million to two European collateralized loan obligation (CLO) warehouses — where issuers park the underlying corporate loans in a bank facility before the CLO is issued — and also lent an undisclosed amount to an unnamed private equity firm, which used the capital to buy a package of residential mortgage portfolios.

Despite these deals, however, NZ Super CIO Matt Whineray has warned the fund is currently finding it more difficult to find sources of yield; he expects that the fund will deliver more muted returns in 2015.

For more information on NZ Super’s recent strategy and future prospects, see our fully revised and updated fund profile.


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