This September, the New Zealand Superannuation Fund turns five. DAVID CHAPLIN finds out if it will be a happy birthday for the country’s largest investment fund. The New Zealand Superannuation Fund.
(NZS) is not perfect but it’s pretty close to it, according to a recent survey of sovereign wealth funds conducted by the Washington DC-based Peterson Institute.
In the study – which reviewed fund governance and transparency factors – NZS scored 24 out of a possible 25 putting it in the top position just ahead of the Norway Government Pension Fund (23) and the Timor-Leste Petroleum Fund (21.75).
(Australia’s Future Fund managed only 17 out of 25 in the Peterson Institute scoreboard, ranking just outside the top five.) The Peterson result was a nice little pat on the back for the NZS and a vindication of its open-door policy – a policy that has at times left the Fund vulnerable to attack. The country’s Green Party, for example, has taken a number of pot-shots at NZS, lambasting its holdings in companies linked to the nuclear, munitions and tobacco industries.
Such political pressure has met with some success too. Soon after the Green’s lambasted NZS for owning shares in tobacco firms last June, Prime Minister Helen Clark was quoted as saying: “Personally I don’t like seeing superannuation fund money going to tobacco companies. I don’t think that’s ethical at all.”
By October 2007 NZS had promised to divest all its NZ$37.6 million worth of tobacco stocks. The Fund’s commitment to monthly performance reporting has also left it open to media fear-mongering and public over-reaction. For instance, after NZS revealed in March 2008 that it was down almost 6 per cent in the first quarter, a recently-formed lobby group called Exposing Unacceptable Financial Activities (EUFA) made a creative link with that paper loss and the rash of finance company failures in the country. “We are fearful,” an EUFA release said, “of what impact this will have on the country when the Nations retirement funds are swallowed up the same way that we have seen individual investors money disappear over the last year.”
Quite clearly some of the details of the NZS mission have yet to embed themselves in the public consciousness. With no draw-down legally possible until 2020 and a government-guaranteed annual cashflow of about $2 billion the Fund is in a good position to handle any short-term volatility.