Achieving Investment Excellence

Case Study—New Zealand Superannuation Fund¹

BUILDING A GLOBAL INVESTMENT FUND FROM SCRATCH WITH THE MISSION TO MAXIMIZE THE FUND'S LONG-TERM RETURN, AND INTEGRATE CLIMATE CHANGE IN A DEEP WAY CONSISTENT WITH THE LONG-HORIZON NATURE OF THE FUND

Background

The New Zealand Superannuation Fund—NZSF was created from scratch in 2001. It started investing in 2003. The fund is a way for New Zealand to save now in order to make future pension costs more affordable. From the beginning, the fund has focused on global best practices in order to learn from them. The size of the fund, in March 2018, was NZ$38 billion² (US$25 billion). Although it is a government vehicle to save future tax, it is managed by a fully independent Crown entity with clear separation between the New Zealand Government and the fund. This means that the fund can make independent, long-horizon investment decisions. The fund has a true long-term character: its size will not peak before 2080. Since its creation, the performance of the fund is well ahead of its benchmarks. One of these benchmarks is a passive Reference Portfolio consisting of 80% equities and 20% fixed income. The board delegates responsibility for all investment decision-making to the investments team, except for the choice of the Reference Portfolio. The board makes decisions about the composition of the Reference Portfolio. The fund has to operate in a way that it will not damage New Zealand's reputation as a responsible member of the world community. ...