Listed equities boost NZ Super Fund's year-end results

Strong-performing listed global equity markets underpinned a NZ$9.3 billion ($5.34 billion) asset growth for the New Zealand Super Fund for the year to the end of June 2026.

Jo Townsend, CEO of the Guardians of New Zealand Superannuation (the Guardians), said the result was a satisfying one, following strong performances by the fund in the previous two years.

With the S&P500 up 21% last year, the overall driver of the strong return for NZ Super was undoubtedly global equities. “Equities are the main driver, but we have a very diversified portfolio overall,” Townsend told AsianInvestor.

“About half of our portfolio is different to the reference portfolio, and that would be a combination of things like timber, infrastructure, private equity and tactical credit.”

Jo Townsend
NZ Super Fund

The reference portfolio is a notional, passively-managed portfolio of 80% global equities and 20% bonds that is used to determine the amount of value added by the Guardians’ active investment strategies.

Continued outperformance by global equity markets helped boost the value of the NZ Super Fund to NZ$94.4 billion at the end of the 2026 financial year. Fund returns of 14.17% (after costs and before NZ tax) for the 12 months to June 30, 2026 were well ahead of the 2.71% return on 90-Day Treasury bills for the same period, but lagged the reference portfolio benchmark by 0.1 percentage points.

“In the short term, a concentrated portfolio can achieve strong results; however, over the long-term, we firmly believe a more diversified portfolio is better suited to our mandate,” said Townsend.

The fund’s returns over the past 20 years have generated NZ$22 billion over and above the passive benchmark. “To put it another way, during that period the fund has achieved an annual average return of 9.68%, as opposed to the reference portfolio's annual average return of 8.19%,” Townsend said.

Apart from the listed equity holdings, other active investment strategies, including credit and arbitrage strategies, performed strongly, as did static target strategies; for example, developed market equity multi-factor mandates.

One area where the fund has seen some success in previous years is with its strategic tilting programme, run internally by the fund’s investment team. But 2025/6 was one of underperformance.

“The strategic tilting programme has been very beneficial for us over the longer term,” said Townsend. “It didn’t do so well over the past year, but we absolutely understand why. Valuations, particularly for US equities, are looking expensive to us.

“The way the tilting process works is where equity prices continue to go up and up, we gradually will be selling down. So, when you’re short equities and prices continue to go up, you’re underperforming.”

And although it did contribute negatively in the past year, Townsend said it is still “a very valuable strategy that gives us the flexibility to manage through volatility, particularly in periods where markets are moving really quickly.”

“The fund has been very disciplined on staying true to our approach during periods of volatility, like during the GFC [global financial crisis] and the Covid pandemic.

“The worst thing any investor can do is lose faith in their strategy and cut a position when markets are down. We are very clear that one of the best opportunities for us is to buy assets when listed markets are falling, and we are very disciplined about how we will do that.

Earlier this year, the Guardians announced it had lowered the fund’s long-term expected annual return from 7.8% to 7.2%.

Townsend said that decision reflected the Guardians’ view that returns on equities were likely to decrease in the future and a reduction in the fund’s active risk budget.

“Returns for US equities over the past couple of years are close to double annualised returns for the past 20 years, so we would expect there to be some reversion to the mean at some point,” she said.

Townsend said lowering the expected return did not affect the fund’s benchmarks. “We will continue to be judged according to whether we deliver more value for taxpayers than would be generated by the Government using the fund’s assets to pay down debt, and whether our long-term returns outperform a passive strategy with an equivalent risk appetite.”