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Year Ended 30 June 2020

Returns from equity markets were more volatile in the last two years following a long period of strong returns since the global financial crisis. Returns fell sharply in late 2018, amid fears of recession and trade wars, rebounded through 2019 as central banks reacted to avert a slump, then dropped more sharply in March 2020 as governments locked down economies to control the Covid-19 pandemic. Government and central bank stimulus in the June 2020 quarter helped share prices recover to near previous highs but the outlook for economic recovery remains very uncertain.

For the financial year to 30 June 2020, the Fund returned -1.7% before tax and after investment management fees, compared to its benchmarks being 4.5% for the Reference Portfolio and 5.7% for New Zealand Government bonds. Global equity returns lagged those from bonds overall. In addition, returns from active management lagged returns from equity market indices almost entirely due to increasing prices paid for technology stocks. Except for the technology rally, investment risk has not been well rewarded over the last two years.

Whilst the under-performance for the last two years has reduced the Fund’s average investment return over the last 10 years back to 8.6% per annum before tax and after investment management fees, 1.0% behind the Reference Portfolio, it remains ahead of that from New Zealand Government bonds by 3.2%.

Table 1: Investment Performance

Year ended
30 June 2020
$ million
Year ended
30 June 2019
$ million
Surplus before tax    (82.4)     149.5
Less income tax expense      (8.8)      (32.7)
Surplus after tax    (91.2)     116.8

Investment Returns

Below is a comparison of the returns from each asset class compared to the relevant asset class benchmark. All returns in New Zealand dollars before tax and after investment fees.

Table 2: Asset Class Returns compared with Benchmarks for the financial year ended 30 June 2020

Asset ClassYear ended
30 June 2020
Actual %
Year ended
30 June 2020
Benchmark %
Total Fund1 and 2    (1.7)     4.5
Global bonds - 100% hedged     2.7     5.6
Global equities     1.7     6.4
Global private equities     6.9     6.4
New Zealand equities   12.2     9.7
New Zealand private equities     1.2     9.7
Catastrophe insurance     6.4     8.7
Life settlements   27.0   22.5
Style Premia  (22.9)     5.9
Currency overlay    (3.9)    (3.1)

1. The Total Fund return includes currency hedging to the NZD.  Global bonds are fully hedged.  The returns for global equities, global private equities, catastrophe insurance, life settlements and style premia are the unhedged returns.  

2. The benchmark for the Total Fund is the Reference Portfolio.

3. The benchmarks for global private equities and New Zealand private equities are the same as for global equities and New Zealand equities respectively.

Change in Net Asset Value of the Fund

Set out below is a table showing the change in the net asset value of the Fund for the financial year to 30 June 2020.

Table 3: Change in Net Asset Value of the Fund

Year Ended
30 June 2020
$ million
Opening net asset value 1 July 2019   4,535.9
Interest and dividend income       96.2
Changes in Market Values:
     New Zealand equities       12.2
     Global equities       (47.0)
     Global fixed interest       (1.3)
     Property - New Zealand       (1.2)
     Global Private Equity        3.1
     Style Premia Fund   (117.1)
     Other investments     (20.0)
     Insurance-linked Assets (net)      33.7
Total    (137.6)
Income Tax Expenses       (8.8)
Operating Expenses     (41.1)
Net Membership Activities   (174.5)
Closing Net Asset Value 30 June 2020  4,270.1

Net Assets

The net assets are those used in the financial statements for the years ended 30 June 2020.