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NZ Superannuation Fund Issues First Performance

NZ Superannuation Fund Issues First Performance Report

The New Zealand Superannuation Fund today released the first of its planned regular monthly performance updates. The report shows that the Fund had total assets of $2.709 billion at November 30 including over $100 million in the domestic sharemarket.

Treasury bills valued at just over $2.4 billion were transferred to the Fund on September 30 and since then there have been regular contributions of just under $70 million per fortnight.

By November 30 approximately one third of these assets had been invested, with the Fund’s asset allocation as follows:

• Treasury bills and cash ($1.806 billion or 67% of total Fund assets);

• International equities ($575m or 21%);

• New Zealand fixed interest securities ($226m or 8%); and

• New Zealand equities ($102m or 4%).

“It will be some time before the money we plan to allocate to each asset class is fully invested,” said Fund CEO Paul Costello. “We need to allow for the process of selecting and appointing investment managers. The first appointment was made in September and work will continue during 2004. Our aim is to have the Fund close to fully invested by June 2004.”

He added that the Fund was committed to providing regular reporting on its activities, and would do so as transparently as commercial sensitivities around its investment activities allowed. This will include monthly reports on its performance and asset allocation. These will be posted on the Fund’s website www.nzsuperfund.co.nz “Our overriding goal is to invest the money allocated to us by Government in a commercial and prudent way that maximises returns without causing undue risk to the Fund as a whole,” said Mr Costello.

The Fund’s major performance target is to exceed, before New Zealand tax, the risk-free rate of return (i.e. the interest rate payable on cash) by an average of at least 2.5% per year over rolling 20-year periods. While the Fund is likely to exceed this target in some years, it may not reach it in others, said Mr Costello.

He pointed out that this target is not likely to be achieved in the Fund’s first year of operations (2003/04) given that such a large proportion of its assets will be held in cash during the year, reflecting the time taken to progressively appoint and fund investment managers.

In October, the Fund’s investment earnings (interest, dividends and capital gains) were $10 million – a return of 0.40% for the month. In November a further $18.9 million was earned – equivalent to a return of 0.73% for the month. Performance for the two months combined was 1.13%, compared to a benchmark return of 0.83% represented by the return on Treasury bills.

As the proportion of cash winds down and the Fund comes to more closely resemble its long-term asset allocation, performance will also be measured against a benchmark of relevant indices for each asset class weighted to the Fund’s asset allocation. This will allow commentators to observe how much value has been added through the selection of active investment managers in each asset class.

The top 10 equity holdings at 30 November – within New Zealand and internationally

At November 30, AMP Capital and Brook Asset Management had been appointed to manage NZ equities, ING to manage NZ fixed interest and Barclays Global Investors to manage international

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