Jo Townsend, CEO of NZ Super

Sovereign wealth funds (SWFs) and pension funds in Oceania are global leaders when it comes to having rigorous governance, sustainability and resilience (GSR) practices, with Kiwi fund NZ Super leading the pack in the latest industry report card published by Global SWF. 

The 2024 GSR Scoreboard examined 200 SWFs and public pension funds (PPFs), which together are called state-owned investors (SOIs), and ranked their GSR practices and efforts. The funds are then given a score out of 100 per cent.  

Global SWF defines PPFs as “an investment vehicle owned by a national or regional government that buys, holds, and sells securities and/or assets on behalf of its pensioners in pursuit of financial and/or economic returns”, although the report included several super funds like AustralianSuper, Australian Retirement Trust and REST.  

The report found that Oceania is the region with the highest average GSR score (80 per cent) in 2024.  

Leader in the zone, NZ Super, not only had a perfect score on GSR, but also was the best-performing SWF in the past decade (FY14-FY23) with an average return of 10.8 per cent a year. 

“It keeps double-arm’s length independence from government and impressive transparency practices, by disclosing its returns monthly and its holdings biannually,” the report said.  

“Its low-carbon portfolio has outperformed the reference portfolio (‘climate alpha’) and, in 2023, it reduced its carbon footprint by 60 per cent as measured by emissions intensity. 

“It projects its balance sheet to year 2119, when it expects to reach US$1.7 trillion ($2.5 trillion) despite government withdrawals, which will start in 2035/36.” 

Australia’s Future Fund scored 88 per cent on GSR and had an average 8.8 per cent a year 10-year return.  

On a state SWF level, VFMC led the way with 88 per cent, followed by TCorp (64 per cent) and QIC (60 per cent).  

Aware Super and REST had the highest GSR score (96 per cent) among the Australian pension funds assessed, followed by AustralianSuper and Cbus (each with 88 per cent), then ART, UniSuper and HESTA (each with 84 per cent).  

“Most funds maintained their 2023 scores, except for REST, which increased its resilience by covering liquidity shocks in its investment guide, and VFMC itself, which started to report its impact investments,” the report read. 

“All funds in Oceania perform exceedingly well in disclosure, as none of the funds failed to report annual accounts, investment figures and returns. Moreover, they have a robust resilience framework and are up to date with the latest sustainability practices.” 

Good GSR = Superior return?

The GSR evaluation approach is partially informed by the Global Pension Transparency Benchmark, conducted annually by Investment Magazine sister publication in partnership with Canadian research house CEM Benchmarking.  

Notably, the Global SWF report also found the highest level of correlation (0.81) between GSR scores and 10-year return in Oceania – Australian funds have proven that “strong governance and sustainability can lead to superior returns”, the report said.  

“The contrary is also true: Latin American and African funds have still work to do when it comes to best practices, and that gets reflected in lower returns.” 

However, North American funds have a lower correlation between GSR scores (0.29), as they have strong investment governance and returns but poorer sustainability practices. This raises an interesting question of which one of the three factors in GSR is most likely to have a material impact on performance, and whether cultural and regional differences play a role. 

When it comes to fund sizes, while the biggest funds do not necessarily have the best financial returns, they do tend to have more robust GSR practices.  

“The 40 extra-large funds, with AUM over US$180 billion ($271 billion) perform better than the rest, especially around resilience. The large and medium funds perform similarly well, while those below US$43 billion ($64 billion) in AUM fail the test in terms of long-term survival,” the report read.

For the first time in history, the collective AUM of SWFs has surpassed US$12 trillion (18 trillion) and the AUM of PPFs passed US$24 trillion ($36 trillion), the report said.  

In the first half of 2024, SWFs around the world deployed US$64.2 billion ($96.7 billion) in 135 investment deals, while PPFs deployed US$31.9 billion ($48 billion) in 101 deals.  

Join the discussion