NZ Super, the sovereign wealth fund for Aotearoa, has a clear mandate to grow its assets to meet the retirement liabilities of today’s teenagers. With eyes fixed on this faraway horizon the fund has instituted governance practices and a way of investing that are world-class and should benefit future generations in the land of the long white cloud. AMANDA WHITE reports.
New Zealand is a small country with a reputation for harbouring great talent. Its national rugby team, the All Blacks, are renowned as world leaders on the field. Mountaineering legend Sir Edmund Hillary, who made the first ascent of Everest with Sherpa Tenzing Norgay, also hails from the shaky isles. The nation produces world-class artists, such as opera singer Dame Kiri Te Kawana, film-maker Peter Jackson, musicians the Finn family, and indie pop up-and-comer Kimbra. Similarly its sovereign wealth fund, the $15.2 billion New Zealand Superannuation Fund (NZ Super), executes an investment strategy that is seen globally is as something worth emulating. NZ Super earns the highest possible ranking on the SWF Institute’s Linaburg-Maduell transparency index, and ranked first in a 2007 review of 32 sovereign wealth funds in Edwin Truman’s research paper, “A scoreboard for sovereign wealth funds”, published by the Peterson Institute for International Economics.
It is also a research partner at the Toronto-based International Centre for Pension Management, sitting alongside contemporaries such as the Ontario Teachers’ Pension Plan, CalPERS, Denmark’s ATP and Australia’s Future Fund in setting a research agenda for advancing pension excellence. NZ Super is known in the global pensions community for its governance policies. Typically, pension fund governance is interpreted as relating to the activities and behaviour of boards. But NZ Super integrates good governance throughout the fund so that people in its three executive committees – for leadership, investment, and risk and portfolio monitoring – are accountable for decisions at all levels of the organisation. Consistent with its good governance, NZ Super’s way of allocating assets and working as a team to make investment decisions has undergone a series of refinements since the fund’s September 2003 inception. The purpose of NZ Super, which was seeded with $3.2 billion, is to reduce the tax burden on future taxpayers who will fund New Zealand Superannuation, the retirement benefit paid to eligible citizens by the Federal Government. The size of the fund is not expected to peak until today’s 19-year olds are able to begin claiming the benefit in 2056. This timeframe means the fund is in the enviable position of being truly long term – and this is reflected in the way it invests.