Guardians of New Zealand Superannuation, which manages the $54 billion wealth fund, has now warned of an impending correction in the US market. Its CEO, Jo Townsend believes that the US markets, which have delivered healthy returns to investors recently, is likely to cool.
The fund was ranked the best performing sovereign wealth fund earlier this year by analytics firm Global SWF. It returned 14.2% to investors for the year that ended on June 30.
“Returns for US equities over the past couple of years are close to double annualized returns for the past 20 years, so we would expect there to be some reversion to the mean at some point,” Townsend wrote in her statement to investors.
Stating that while a concentrated portfolio can achieve strong results in the short-term, a diversified portfolio over the longer term is more suited to their mandate. The wealth fund has delivered an average annual return of 9.68% over the last two decades.
Earlier, the fund had reduced its long-term expected annual returns guidance to 7.2% from 7.8% earlier, citing subdued returns from equities. At the same time, the fund also reduced its active risk budget.
Despite being underweight on US tech names, Nvidia, Apple, Microsoft, Alphabet and Amazon accounted for its top five positions by value, with the US equity exposure being NZ$31.7 billion at the end of the previous financial year.
Besides equities, New Zealand’s pension fund also allocates capital to timber, real estate, private markets, and other alternative investment sources as well.
Townsend’s warning echoes the sentiments shared by Nicolai Tangen, the chief of Norway’s Sovereign Wealth Fund, the biggest in the world, who also believes that returns could be similar to what were achieved in the first six months of the year.
(With Inputs From Agencies)
