TITLE: Long Term Investing in a Low Return World AUTHOR: Fiona Mackenzie Head of Investments EVENT | PRESENTATION: NZSA National Conference, 12 September 2015 Disclaimer This presentation is provided for information purposes only and may not be relied on. It is intended to highlight topics and not be comprehensive. Every effort has been made to ensure the accuracy of the information contained in this presentation but it is necessarily generalised and no warranty is made as to its accuracy. The information in this presentation does not constitute legal or financial advice. Participants and readers must seek specific advice on any particular matters.
Our Performance: Since Inception Cumulative Fund Return To 31 May 2015 4.8 4.3 3.8 3.3 Upper Expectation (95% Confidence Interval) 2.8 Index 2.3 1.8 1.3 Lower Expectation (95% Confidence Interval) 0.8 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 NZSF Actual (Net of Fees) NZ T-Bills NZ T-Bills +2.5% Reference Portfolio Further details available at www.nzsuperfund.co.nz
C3 - RESTRICTED CONFIDENTIAL\ SD#1676317 \ PG 3 Investment Approach: Endowments Long Certainty of Operational Location & Horizon Liquidity Independence Crown Owner We can ride-out short term volatility Genuine contrarian investor We can invest in private market and illiquid assets We pay lower tax in some jurisdictions (sovereign status) Favourably regarded as a potential co-investor and business partner
C3 - RESTRICTED CONFIDENTIAL\ SD#1361582 \ PG 4 Investment Approach: Importance vs. Interest
Investment Approach: What vs. How
C3 - RESTRICTED CONFIDENTIAL\ SD#1361582 \ PG 6 Investment Approach: Costs Matter
Market Environment: Lower for Longer
Market Environment: Lower for Longer
Market Environment: Behaviour Hard mandate limits, fixed claims & slow-moving expectations almost guarantee distortionary behaviour. Lower for longer means both growth and rates stay low. What about volatility? Risk taking behaviour in lower for longer world. – Moving up the risk spectrum to achieve an absolute return can be self- defeating. Flight to quality (asset classes, sectors, markets & regions). – How much should you pay for a good thing?
C3 - RESTRICTED CONFIDENTIAL\ SD#1361582 \ PG 10 Conclusion We are firm believers in passive investment and highly disciplined about active investment – We work hard to exploit our endowments – Separate opportunities from access points – Allocate capital to the opportunities we are most confident in – Use long-term investment themes to inform decisions – Prefer direct, flexible access – Integrate ESG throughout the investment process We have out-performed the market and exceeded our passive Reference Portfolio benchmark by $3.8 billion since inception – and exceeded the government’s cost of debt by more than $13 billion
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