An independent review of the nation’s $43 billion NZ Super Fund has given the organisation that runs it high marks.

The review, prepared for the New Zealand Treasury by respected global business advisory firm Willis Towers Watson, said the Guardians of New Zealand Superannuation, the Crown entity that manages the Fund, is a global best-practice organisation and effective in carrying out its mandate.

Overall Willis Towers Watson found the Guardians was “best-practice in its activities and more capable of achieving high performance than the vast majority of its peers.” It described the Guardians’ governance model as “exceptionally strong” and its investment approach and returns as “very impressive”.

Chair Catherine Savage said the Guardians’ Board was proud of the review. “We aim to be world class in everything we do and it is incredibly affirming to hear that we are indeed performing at global best practice level. We take our mission to be the kaitiaki - Guardians - of the investment New Zealanders are making in the Fund very seriously.”

Willis Towers Watson rated the Guardians’ governance model as AAA, stating it is “an exceptional rating shared by at most three or four peer funds globally”. The Guardians’ culture and investment models were both rated AA, which the reviewer noted as being excellent.

The review also described the Guardians’ communications with its stakeholders as best practice and “exceptional in the context of leading international peers”.

“Willis Towers Watson commented that the defining cultural characteristic of the Guardians is our constant attention to improvement,” said CEO Matt Whineray. “As well as validating the robustness of our approach to managing the Fund, the report provides some very useful pointers for our future development, which we welcome.”

The report says that responsible investment is a rapidly developing area of investment practice that is set to become increasingly mainstream. It found the Guardians’ approach to responsible investment to be impressive and said there was a need to continue to evolve and innovate to maintain the Fund’s leadership position in the area, for which more resource would be needed in the future.

In an evaluation of the Fund’s investment performance since inception, Willis Towers Watson noted the Fund’s performance both in absolute and in relative terms (i.e. the value added) has been very impressive.  It said this performance was partly due to the Guardians’ intentional adoption of a high risk profile for the Fund resulting in strong returns from the Fund’s passive exposure to listed equities and bonds, as well as a significant contribution from active, value-adding investment strategies.

The reviewer believes it is reasonable to expect lower returns from both passive and active investments over the next five to 10 years, given lower levels of global growth and future market conditions, which Willis Towers Watson believe will be less supportive.

The review took place from March to June 2019 and consisted of on-site and teleconference meetings, a document review, analysis and comparison with leading global asset owners. Willis Towers Watson looked at the Guardians’ governance, people and investment models, including the ex-ante risk framework, policies and procedures, reference portfolio approach to investing, responsible investment, and an evaluation of the Fund’s investment performance. 

The Guardians is required by legislation to undergo an independent review every five years to provide the Government assurance on how effectively and efficiently it is performing its function. Willis Towers Watson noted that conducting an independent review represents strong governance in its own right, by supporting accountability and constructive feedback.

The terms of reference are set by the Minister of Finance on the advice of the NZ Treasury and Treasury engages the independent reviewer. This year’s review was the fourth, with the previous review undertaken in 2014.

The final report was tabled in Parliament by the Minister of Finance on 19 September. It includes five recommendations and 13 suggestions for improvement.

In addition to tabling the review, the Government has confirmed two reappointments to the Board of the Guardians of NZ Superannuation:

• Chair and Member Catherine Savage has been reappointed from 1 October 2019 up to 31 March 2021

• Member Stephen Moir has been reappointed from 1 October 2019 up to 30 September 2020

The following documents are available from the NZ Super Fund website:

• Click here to download the full Willis Towers Watson report

• Click here to download a summary report

• Click here to download a copy of the Guardians’ formal feedback to the report