Cullen fund makes NZ$716.5 mln loss in 07/08

The New Zealand Superannuation fund reported it grew 7.6% to NZ$14.128 billion in the year to June 30, but only after the regular contribution from the government of NZ$2.103 billion helped overcome a NZ$716.5 million loss because of extreme weakness on global markets. The fund was set up in 2003 to invest around NZ$1.5 billion of taxpayers money a year for the next 20 years to build up a fund to help pay the pensions for New Zealand's ageing population. The annualised rate of loss on investments was 4.92% in 2007/08, although the return on investments net of tax and costs since the fund's inception in September 2003 has averaged 10.34%. This is 0.55% per year above the return the fund would have made if it put the money in passive funds.

Here is the full statement below from the New Zealand Superannuation Fund.

The Guardians of New Zealand Superannuation today released their Annual Report and announced the investment returns of the New Zealand Superannuation Fund for the year ended 30 June 2008. The Fund's net return on investments for the financial year was -4.92% before New Zealand tax. During the year, the Fund grew from $13.1 billion to $14.1 billion. The Guardians' Chairman, Mr David May, said: "After four years of significant outperformance, the New Zealand Superannuation Fund recorded a negative return over the past year. This has partially reversed the gains made while investment markets were performing strongly. "The Fund has been impacted in the short term by the turbulence in the global equity markets. The negative impact comes despite our lack of any significant exposure to the subprime market, the finance company sector, or to the liquidity strains suffered by many financial institutions. "The Fund deliberately invests in global equity markets because we expect that they will perform best over the long term. The Fund's long-term horizon means it is well placed to withstand ups and downs in the market. The Board remains confident that this remains the right approach and that the appropriate response to the credit crisis is to remain calm and ready to benefit from the more favourable risk and liquidity premia in the years ahead." The Guardians' Chief Executive Officer, Mr Adrian Orr, added: "People are naturally interested in how the Fund has performed through the more recent market turmoil, that is since end-June. Over July and August, we returned around 0.23%, a small but positive number. However, the market has remained volatile through September. "We are going through a significant and rapid rearrangement of the global financial system. These are dramatic and unsettling times. Even then, however, the aggregate impact on the Fund, while not pleasant, is not outside the bounds of our long-term expectations to date. Investment opportunities for a long-term fund like ours are on the rise. We remain disciplined in our decision making. "From an organisation perspective, we have made excellent progress over the year. We have developed a strong institutional structure and team that will serve the Fund well as it grows in size and complexity. We also continue to act as a responsible investor," concluded Mr Orr.