Across the Tasman Sea,  Australian superannuation funds believe  they target long-term performance, but  their apparent fixation on short-term  results suggests otherwise.  In September the Pacific Islands  Forum was held in Auckland. Teams  also began contesting the 2011 Rugby  World Cup on pitches across Aotearoa,  the land of the long white cloud, and  the nation’s annual Fashion Week took  place. Looking out of his office window  at a giant inflatable rugby ball, Adrian  Orr, CEO of NZ Super, becomes  philosophical.  “You learn in everything you do in  life. What you think is original happens  everywhere else,” he says. “We look at  who is good at investments.”  “We are deliberately proactive in  working out which funds around the  world are most akin to [us] – being longterm  investors and [having] the specific  mandate we have.”  Looking beyond its own backyard  has paid off for the fund: its corporate  structure and investment processes  are arguably global best practice in the  making. Australians may have to concede  that Kiwis currently have it over us in  pension fund management. But on the  rugby field? That’s another story.

Reference point  NZ Super restructured its  investment team in the last financial year  by discarding portfolio research, private  markets and public markets teams. In  their place, the fund established asset  allocation and investments divisions,  which account for 25 of its 70 staff.  This gives Orr sleek reporting lines  from six general managers leading  asset allocation, investments, finance,  human resources, corporate strategy and  operations teams.  But one of the most interesting  changes the fund has made is its  divergence from a long-term strategic  asset allocation (SAA) plan to actively  investing away from a simple, low-cost  and largely indexed “reference” portfolio  that is capable of achieving its aim.  “We wanted that construct because  we operate in a very transparent  environment,” Orr says.  The reference portfolio is determined  by risk tolerances set by the fund’s board.  It has a 70 per cent allocation to global  equities, 5 per cent to New Zealand  equities, 5 per cent to global listed  property and 20 per cent to fixed income.  The reference portfolio is not the  real investment exposure of the fund.  NZ Super still invests actively. But the  portfolio acts as a benchmark against  which the excess returns, risk and costs  of active investment decisions can be  measured and justified.  “Every investment is assessed on a  stand-alone basis,” Orr says.  With a nod to New Zealand’s rugby  colours, he says the reference portfolio  ensures the distinction between active  and passive returns is kept “very black  and white”.