New Zealand Super is well-known for its strategic tilting program and this program continues to be the key driver of the fund’s returns over the past five years
New Zealand Super’s strategic tilting program continues to be a key driver behind the fund’s investment performance and was the number one contributor to active returns over the past five years, adding just under one per cent per annum to the total result.
It outperformed other active strategies, including developed markets equity multi-factor, tactical credit and infrastructure development strategies.
Despite being underweight equities on average through the period, our equity tilting delivered strong positive returns, in particular through tilting Japanese and emerging markets equities
NZ Super produced a return after costs and before tax of 11.8 per cent over the financial year 2024/25 and saw total assets of the portfolio increase by NZ$8.4 billion to NZ$85.1 billion.
Yet, the tilting program also represented one of the highest active risk strategies, taking up well over 70 basis points. Only the developed market equity multi-factor strategy has a higher risk profile.
“Strategic tilting added significant value to the fund in 2024/25, while our trend opportunity was the largest detractor from fund performance,” the fund said in its annual report published last week.
“We apply tilts to broad market assets across regions in equities, rates, currencies and credit. This year included a number of geopolitical and macro-economic events that were material to investment markets, providing volatility, challenges and opportunities for the team to manage through.
“Overall, equities climbed significantly over the year with bond yields increasing in many regions as well. Despite being underweight equities on average through the period, our equity tilting delivered strong positive returns, in particular through tilting Japanese and emerging markets equities.
“Currency tilting performed well, driven in particular by tilting the US, Australian and New Zealand dollars. Additional value was added through effective tilting in rates and credit markets,” the fund said.
Real Assets and Trend-following Detract From Results
But where the strategic tilting program benefited from the volatility in markets, trend-following strategies suffered from these knee-jerk reactions in global markets, NZ Super said.
“The first half of 2025 has been marked by economic surprises in the form of unexpected and changing tariff announcements, leading to a dramatic fall and equally abrupt market rebound.
With the sharp speed of the market movements, this sort of environment is unsuited to trend strategies, negatively impacting all trend programmes
“With the sharp speed of the market movements, this sort of environment is unsuited to trend strategies, negatively impacting all trend programmes.”
Real assets also delivered weak returns last year, partly due to underperformance across the fund’s largest exposures, including Longroad Energy, RetireAustralia and Kaingaroa Timberlands.
NZ Super has closed its infrastructure partnership with Dutch pension fund manager APG, the fund said in its annual report. The partnership was established in December 2024 to explore potential infrastructure co-investments, but the APG Infrastructure Asset Owner Fund I has not made any investments and is now dissolved.
Reference Portfolio Review Deferred
The five-year reference portfolio review has been deferred to 2025/26, due to a change in leadership positions and to incorporate broader risk metrics.
“Originally planned for completion during the 2024/25 financial year, the review has been deferred to accommodate changes to the Board composition and the Chief Investment Officer (CIO) role, and to incorporate other considerations, including a broader range of risk measures and relevant recommendations from the five-year independent review,” the fund said.
“Significant progress has been made during the year, with completion now due in 2025/26, aligning with other internal investment reviews in progress.”
Stephen Gilmore, the former CIO of NZ Super, left the fund mid-last year to take up the role of CIO at US pension fund CalPERS. He was replaced by NZ Super staffers Brad Dunstan and Will Goodwin, who became joined Co-Chief Investment Officers of the fund.
Jo Townsend was appointed as the fund’s new Chief Executive Officer in April 2024, after the resignation of Matt Whineray in 2023.
_________
[i3] Insights is the official educational bulletin of the Investment Innovation Institute [i3]. It covers major trends and innovations in institutional investing, providing independent and thought-provoking content about pension funds, insurance companies and sovereign wealth funds across the globe.