30 Sep 2008

Super fund plans to buy shares despite $716m loss

5:57 am on 30 September 2008

The New Zealand Superannuation Fund plans to buy more shares despite the turmoil in international financial markets that resulted in its recording of a $716 million loss for the year to June.

The result, a negative return on investments of 4.9% before tax, was the fund's first loss since its inception in 2003.

Chief executive Adrian Orr says the fund is buoyed by the international turmoil, viewing it as an opportune time to buy.

Mr Orr says firms worldwide are short of cash, which plays into the hands of cash-rich investors such as the fund.

But the Green Party and Council of Trade Unions say the Government should consider suspending further contributions to the fund while sharemarkets stabilise.

They say that while the cost of borrowing funds overseas remains high, the Government should divert some of the fund's contributions into infrastructure spending, rather than financing it through borrowing from overseas lenders.

The fund returned a slight increase of 0.23% on its investments during July and August, but says the market remained volatile in September.

Overall, the fund grew from $13.1 billion to $14.1 billion during the year.

Fund managers say investment opportunities are on the rise, and it will remain disciplined in its decision-making.

Super fund for public servants

Continued volatility on world share markets has already taken its toll on New Zealand's superannuation fund for public servants.

The Government Superannuation Fund, which closed in 1992 but still has 62,000 members, posted a $260 million after-tax deficit in the year to June.

About half of the fund is invested in international shares, a quarter in fixed-interest investments and the rest in New Zealand shares, property and commodities.

Its returns on New Zealand shares fell by 22% and world shares fell by 12%.

The fund's manager, Alan Langford, says there are no plans to lessen the fund's $3.6 billion exposure to equity markets.

Mr Langford says payouts to members are fixed in law and will not be affected by the deficit.

The fund remains confident that a diversified investment strategy, including overseas shares, is the best way of maximising its long-term returns.