The Government Superannuation Fund made $285 million in the year to June - reversing two years of losses. The result is a return of 10.4% on the fund's assets.
The fund, which has more than 67,000 members, also increased its expected margin of return over Government stock to at least 2.5%.
It's also introducing a new administration system worth up to $10 million and has changed the way its investment strategy is monitored.
Fund board chairman Tim McGuinness says the market rally and active management have contributed to the turnaround.
New reference and target portfolios have been created to allow better assessment of whether diversification and active management decisions are adding value.
Mr McGuinness says the fund has started the new financial year well, but volatility is expected to continue for some time.