NZ Super: Defining long-term success for a SWF investor
Global Investment Insights
with Matt Whineray, Chief Executive Officer, NZ Super Fund
Matt is the Chief Executive Officer of New Zealand’s sovereign wealth fund, NZ Super which has more than NZ$54 billion (AU$50 billion) in assets under management. The fund invests government contributions into a global portfolio of investments with the aim of adding to the Crown’s wealth and, in turn, improving the ability of future governments to pay for superannuation and reducing the tax burden of the cost of superannuation on future generations of New Zealanders.
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Matt is currently primarily focused on people and culture, in his role as CEO of the fund.
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In his role as CEO, Matt is currently primarily focused on people and culture, which has been a priority for the organisation in recent years and has only been heightened by COVID-19.
“Just before the pandemic emerged, we had measured our team culture via an in-depth survey. During the early days of the pandemic we also introduced a short, weekly, pulse-style survey to temperature check how our people were feeling and to get their feedback. We dialled up our internal communications and managers stayed close to their people to ensure everyone was connected and well supported.
Using the pulse survey data, we keep reviewing and adjusting the support we are providing and our internal communications to reflect the responses and feedback. Now we are all back in the office and working flexibly, each business unit has got together to work on a culture development plan. Our leadership team is keen to retain the benefits of increased working from home while still maintaining strong personal connections and the good Guardians culture that has been a hallmark of our organisational success. We are looking at what we need to do to ensure we have got the best of both worlds”, Matt explained.
From an investment perspective, Matt is very excited by the rapid evolution of best practice in responsible investing that is under way globally, despite it proving a challenge for the organisation to remain at the forefront of the latest developments as a smaller fund (in a global context).
“We are working on a refresh of our responsible investment strategy this year and I am very interested to see what the team comes up with”, Matt revealed.
He continued, “we are looking closely at what the top investors are doing around the world, as well as what our domestic stakeholders expect of us. Outside of my role at the Guardians, I have been closely involved in the development of New Zealand’s Sustainable Finance roadmap, which was launched at the end of 2020. Seeing business leaders starting to appreciate the importance of factoring in social, environmental and community considerations into their investment decisions is hugely exciting to me.”
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We are working on a refresh of our responsible investment strategy this year and I am very interested to see what the team comes up with.
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Matt believes that as an industry we need to think long term and holistically about performance, to achieve better outcomes for our ultimate beneficiaries.
The challenge is to ensure that the individual decisions that make up our financial system are made not just with short term financial success in mind, but with our ultimate beneficiaries’ long-term interests at heart.
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NZ Super Reference Portfolio composition: 80% growth, 20% income.
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“Some economists will tell you that transformational change has to be driven solely by pricing signals and property rights. In a purist sense, they are probably right. But the real world is messy. It is pointless producing financial capital if you smash the finite stocks of natural capital along the way because people in future generations are going to need that natural capital. We must figure out a way of being able to preserve and enhance those finite sources of natural capital and live within our boundaries, one decision at a time”, Matt explained.
With long term outcomes in mind, the Fund underwent a portfolio review in 2020 and a number of important decisions were reached:
The Fund’s default Reference Portfolio, which is a low cost, passive listed portfolio that accounts for a little more than half of the Fund’s Actual Portfolio was reviewed and the decision was made to keep a 80% growth, 20% income split;
After some debate the decision was made to keep the foreign currency hedging ratio at 100%; and
A definitional change was made to combine developed and emerging market equities into a single global equities building block.
In terms of active strategies (which aim to add value over and above the Reference Portfolio), the Fund is currently working on infrastructure and real estate, targeting more investment in those sectors over the next few years.
The Reference Portfolio will be reviewed again in 2025, Matt revealed.
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The Fund combined developed and emerging market equities into a single global equities building block.
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Matt shared with us a career specific story about the power of diverse perspectives which has served him well during his time at NZ Super.
“Before I arrived at the Guardians, I had spent 13 years in investment banking, in Auckland, New York and Hong Kong. As a result of that experience, I had a particular and highly transactional view of the world and markets. Early on in my time here, I remember sitting in a meeting with a bunch of the team discussing remuneration practice and incentive structures. As the discussion progressed, I had the ‘shocking’ revelation that the investment banking view of the world wasn’t the only one, and, even more shocking, was not the most valid – it was a great lesson in the power of different perspectives to come up with a better outcome.
The team at the Guardians has come from all sorts of backgrounds, and apply their different views of the world to the problems we face, to the benefit of all New Zealanders”, Matt explained.
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In terms of active strategies, the Fund is currently working on infrastructure and real estate, targeting more investment in those sectors over the next few years.
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Disclaimer
All information contained within this publication is general advice only, as the knowledge levels and needs of all individual and corporate investors vary greatly this publication should not be used solely as a decision-making tool, further opinions and information should be sought before making an investment decision. It is the recommendation of Global Investment Institute (GII) that you seek the opinions of a fee-for-service, independent investment adviser before making any investment decision.
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