The NZ Superannuation Fund's annual return has been battered amid market volatility and the economic impact of the pandemic.
The fund took its biggest monthly hits in February and March at the height of market volatility. [File photo] Photo: 123RF
It has had a 1.73 percent return on its investments in the year ended June to stand at $44.8 billion (after fees but before tax).
The fund took its biggest monthly hits in February and March at the height of market volatility, when it had its second biggest monthly fall of 12.3 percent since being set up.
The annual return was also well below its benchmark reference portfolio, which returned 3.82 percent.
The fund's average annual return since it was set up in 2003 has been 9.63 percent, although it was adversely affected by the global financial crisis of a decade ago, and growth was also constrained when the then National-led government suspended contributions as it looked to cut its deficits in the wake of the Canterbury earthquakes.
Matt Whineray. Photo: Supplied/NZ Super Fund
NZ Superannuation Fund chief executive Matt Whineray said it had always been vulnerable to wild swings in share markets, because its investments were weighted towards shares.
"Yet we also expect the fund to earn back these losses - and then some - in subsequent years as markets recover."
He said the fund had looked to take advantage of trading opportunities as the markets gyrated.
"The fund added significantly to its equity and credit positions as markets fell, and has progressively reduced those positions as markets have recovered," Whineray said.
He said the outlook remained difficult given low interest rates and weak economies.
"Market pricing indicates interest rates will remain very low for an extended period, meaning that expected returns on all assets are below our long run expectations."
The fund was set up to offset growing long term costs of superannuation, and is not expecting substantial withdrawals until well into the 2030s.