According to an NZS spokesperson, the fund increased its global share holdings, achieved mainly via derivatives, in line with the updated strategic asset allocation (SAA) benchmark, now dubbed the “reference portfolio”.
As well, NZS dumped $700 million of commodities investments, fetched about $1 billion after offloading 700 corporate bond holdings and sold down $500 million in listed property as it transitioned to the new ‘reference portfolio’ management style.
“The Reference Portfolio took a number of months to move from the initial design to go live,” the spokesperson said.
The Reference Portfolio is composed of the “cheapest passive exposure” to four broad asset classes currently weighted: 70 per cent global equities; 5 per cent New Zealand equities; 5 per cent global listed property, and; 20 per cent fixed interest.
Under its 2007 SAA review, the NZS benchmark included global equity exposure of about 60 per cent, 7.5 per cent NZ equities, 12 per cent property, 25 per cent fixed interest and 5 per cent alternative assets.
However, the reference portfolio serves as a gauge of NZS’ performance rather than a strict investment guideline with the fund free to pursue a number of active strategies to achieve its stated goal of beating the NZ Treasury Bills rate plus 2.5 per cent over rolling 20-year periods.
NZS has also argued for an earlier resumption of Crown contributions to the fund than the expected restart date of 2020. The government halted contributions to NZS in 2009 citing fiscal constraints, promising to restart contributions when the budget returned to surplus.
“All else equal… it is desirable for the Crown to resume funding sooner rather than later,” the NZS stated in its Reference Portfolio document. According to the NZS, resuming contributions this year could add over $20 billion above the benchmark compared to starting Crown funding in 2020.