The value of New Zealand Superannuation has increased to a record $65.4 billion dollars.
New Zealand 20 dollar notes featuring the image of Queen Elizabeth II. Photo: 123RF
The fund returned 11.9 percent after costs, before tax, in the year ended June with the value of the fund increasing by $9.7b.
Created 21 years ago to help pay future pension costs, the fund's value slipped nearly 7 percent last year on the back of high inflation, rising interest rates and volatile financial markets.
Guardians of New Zealand Superannuation chief executive Matt Whineray said it was a solid result, given the circumstances.
"In FY2022, equities and bonds both performed poorly - an uncommon scenario - and our active management strategies contributed significantly to our final result," Whineray said.
"This year, global equities performed very well."
The global recovery in share prices over the year meant that the super fund's total return slightly lagged that of its reference portfolio benchmark, which generated 12 percent.
However, the fund exceeded its Treasury Bill return benchmark - a measure of the cost to the government of paying into the fund - by 8.1 percent or $4.7b.
Whineray said the global investing environment remained challenging, with core inflation remaining high in many markets, leaving open the possibility of further interest rate rises.
"At the very least, it would seem any decrease in interest rates may be more gradual and further away than might have been expected," he said.
"Our expectation is that will lead to lower returns overall as central banks prioritise reducing inflation over fostering economic growth; however, we are confident the super fund will continue to add value for New Zealanders."
The geopolitical tensions driven by Russia's invasion of Ukraine and concerns regarding China's economy were issues of real concern, Whineray said.
"What matters to a long-term investor like us is total fund performance over time."
Whineray said the growth-oriented nature of the portfolio meant that returns generated would vary from year to year, as would the performance of individual investments.
"The super fund remains heavily weighted to equities, but where we see an opportunity to diversify, optimise risk settings and add value through active investment strategies, we will take it," he said.