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Superannuation Fund achieves 11.83% return

Media statement
For immediate release 22 September 2005


Government Superannuation Fund achieves 11.83% return

The Government Superannuation Fund achieved a pre-tax return of 11.83% for the year ending 30 June 2005 and its net assets grew from $3.37 billion to $3.52 billion, an increase of $148 million.

The results were favourably influenced by New Zealand equities, which produced a return of 21.34% and international fixed interest, which returned 12.32%. Both New Zealand and international fixed interest achieved better returns in 2005 than in 2004.

The Fund’s after-tax return was 7.38%.

The Fund was set up more than 50 years ago to enable state sector employees to save for their retirement. The Government Superannuation Fund Authority was established in 2001 to manage the Fund and administer its various schemes.

Chairman of the Authority, Basil Logan, said today that the pre-tax result was strong, but the Authority had paid significantly more tax than in the previous year. This arose because all the return from international equities in 2005 came from foreign exchange hedging gains, which were taxable.

Mr Logan said that the substantial increase in tax payments had a significant impact on the after-tax return of the Fund and was higher than long-term assumptions.

“However, while short-term results are always of interest, it is important to take a long-term view of our investments. In addition, while its investment results have no impact on entitlements for members, they do have an impact on the long-term cost to taxpayers” he said.

“A key objective of the Authority is to minimise that cost so, in that context, we are very pleased with the $148 million growth in net assets we achieved in 2005” he said.

Mr Logan said that the after-tax return of 7.38% for the Fund compared with the median average after-tax return in the Watson Wyatt Investment Performance Survey over the same period of 7.92%.

“The survey covers 78 standalone New Zealand superannuation schemes which had a higher exposure to property and New Zealand equities, two sectors which performed strongly during the year.”

Mr Logan said that the Board had not made any changes to the strategic asset allocation of the Fund during the year. It had, however, implemented an earlier decision on property investment.

“We appointed three property managers and invested 4.9 per cent of the Fund in property by the end of the financial year, but still had a further 2.6 per cent to invest.”

Mr Logan said the Fund schemes had almost 70,000 members at 30 June this year, but that as it was largely closed to new members in 1992, the number of contributors was steadily decreasing.

Mr Logan said that other highlights during the year included a seamless transition when a new Schemes’ Administrator took over in April and the launch of a revamped website for the Authority.

ENDS

INVESTMENT RESULTS 2005 COMPARED WITH 2004 (PRE TAX)

ASSET CLASS 2005% 2004%
NZ Equities 21.3 21.1
International Equities 9.1 20.9
NZ Fixed Interest 7.8 2.1
International Fixed Interest 12.3 6.9
Property 11.8 -
Total Fund 11.8 12.6


INVESTMENT RESULTS YE 30/06/05 (PRE TAX)

ASSET CLASS ACTUAL
% INDEX
%
NZ Equities 21.3 21.0
International Equities 9.1 9.2
NZ Fixed Interest 7.8 8.1
International Fixed Interest 12.3 12.8
Property 11.8 13.1


INVESTMENT PERFORMANCE 2005 COMPARED WITH 2004

2005$m 2004$m
Surplus pre tax 359.8 393.7
Percentage 11.8% 12.6%

Income tax 115.8 76.8

Surplus after tax 244.0 316.9
Percentage 7.4% 10.2%

Increase in net assets 147.7 192.0

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