Summary performance measures
The performance of the CFIs is outlined in the COMU Annual Portfolio Report 2010 (APR).
Simply put, the objective of each investment fund is to minimise the amount tomorrow's taxpayers will pay to meet the Crown's obligations. To do this successfully, the investment approach of each fund needs to be matched to the nature of those obligations. For example, EQC needs to invest in such a way that it can quickly liquidate investments in the event of a disaster. In contrast, NZSF was established to meet an expected peak in superannuation payments around 2025. It can therefore take longer positions and invest in less liquid assets.[1]
- Figure 16 - CFI long-term returns
- Source: The Treasury
(Return periods are as follows: NZSF from Sept 2003, ACC from June 2001, EQC from Dec 2003, GSF from Dec 2001)
The five CFIs all have different objectives, risk profiles and associated liabilities. They therefore also pursue different investment strategies which makes comparing performance within the portfolio challenging. Nevertheless, some cross-portfolio comparisons are possible. Figure 16 shows the investment performance of the funds under management for the five CFIs since 2001.[2] The three bars indicate:
- actual returns, measured before tax but after fund management fees
- returns against a passive benchmark or reference portfolio - this provides a comparison for what a portfolio of assets with the same risk profile tracking a simple index would have achieved,[3] and
- the Fund's objective.
All of the funds are showing positive returns over this period. However, only the ACC fund has been able to consistently beat its passive benchmarks.[4]
Notes
- [1]COMU APR.
- [2]Important caveats are that, first, these returns are over the period of extreme financial market volatility, and different timeframes show different results (eg, NZSF was comfortably exceeding its Fund's objective prior to the global financial crisis). Second, many of the funds have long-term horizons, so the appropriate final metric could be in 10 years’ time (although they should outperform the passive benchmark in the short term).
- [3]The passive benchmark/reference portfolio is therefore different for the different funds.
- [4]For a more detailed discussion of performance metrics see COMU APR.
