WELLINGTON: The New Zealand Superannuation Fund (NZ Super), one of the world’s best-performing sovereign wealth funds, is looking for opportunities to invest in domestic infrastructure such as roads.
Of particular interest are “large-scale infrastructure opportunities here in New Zealand where we can sit alongside international or domestic capital that has operating sector experience,” Jo Townsend, chief executive of fund manager Guardians of New Zealand Superannuation, said in an interview yesterday.
“There’s a stated need for roads here in New Zealand, so we are potentially interested in looking at roads.”
Townsend was speaking after NZ Super posted an 11.8% pre-tax return after costs in the latest financial year, with funds under management swelling to NZ$85.1bil (US$50bil).
The fund, which began investing in 2003, was created by former finance minister Michael Cullen to help the government pay for the rising cost of the state pension.
Over the past 20 years, the fund’s average annual pre-tax return after costs is 9.92%, making it one of the top-ranked funds tracked by consulting firm Global SWF.
Townsend said US equities “look a little overvalued at the moment” while European equities “look to be better value.”
That’s resulted in the fund moving slightly “underweight” US and “overweight” European equities, though that doesn’t mean it doesn’t want to invest in the United States, she said.
“It’s very much sort of just moving either side of fair value based on what markets are doing at a particular point in time. It’s very systematic.”
Its portfolio is largely comprised of global equities and debt securities, and it also invests in local stocks, private equity, infrastructure and property. The majority of the fund is managed passively, in line with global stock and bond indexes.
Some active investment has helped it to outperform its reference portfolio by about 1.5% a year since inception, Townsend said.
Performance has been “a combination of strong equity markets, but also the work that the investment team is doing on top of that to add additional value,” she said.
The New Zealand government is keen to make more use of Public-Private Partnerships to deliver infrastructure and is considering toll concessions as a tool for funding important new roads.
The fund is also interested in electricity, Townsend said, noting it is already partnering with Copenhagen Infrastructure Partners to assess and, if feasible, pursue the development of an offshore wind farm off New Zealand’s North Island.
The government expects to make its first withdrawal from the fund in 2028, but the sums are not forecast to become substantial for many years and the fund will continue to grow, Townsend said. — Bloomberg
