How NZ Super retained its governance award

One of only two institutions to retain its prize, New Zealand Superannuation Fund has continued its process of improvement in terms of risk, compliance and transparency.
How NZ Super retained its governance award

AsianInvestor’s second annual Institutional Excellence Awards were introduced to highlight best practice, with awards handed out in 16 institutions collectively managing $3.5 trillion.

Moving to the last of our three categories, which is focused on specific areas of expertise, the prize for governance goes to New Zealand Superannuation Fund for the second year running.

The winners were announced on October 30 and received their awards at an exclusive ceremony and dinner on December 2 at The South Beach hotel in Singapore. 

We thank all those who contributed their thoughts to these awards. The full list of write-ups appears in the December issue of AsianInvestor magazine, and more details of our decision-making process can be found here.

New Zealand Superannuation Fund

It is fitting that senior management at New Zealand Super were unable to pick up this award for governance, as the ceremony clashed with its final board meeting. Key to the fund retaining this award for the second year running is its record of constant self-improvement.

Ever since NZ Super ditched the standard asset allocation model in favour of a reference portfolio in 2009, it has shown itself to be a market leader in transparency. It has appointed new heads of risk and compliance and introduced a reporting system in which every business unit maintains a register of risks that could impact its activities. Implemented at an enterprise level, it is forward-looking and unites perspectives from various teams.

Next year the fund aims to establish separate platforms for risk and data management and to launch a solution for post-trade derivatives management.

Underpinning everything that NZ Super is adherence to a long-term philosophy. This year it faced criticism over a loss on a loan investment to the failed Banco Espirito Sanco in Portugal. While it remains confident about recovering these losses via the courts, chief executive Adrian Orr remained resolute on the value of its approach.

After NZ Super sets its reference portfolio, it uses strategic tilting to find opportunities and cross-checks its convictions. Gains from strategic tilting were among the chief reasons for the fund’s 4.45% outperformance of its reference portfolio. It was also a contributor to a white paper on long-term investing as it strives to be a force for promoting a long-term mindset throughout the value chain.

What’s clear is that NZ Super is forging its own path, with board members chosen by an independent nominating committee. The high level of autonomy achieved by its board and investment team is a rarity. 

It is not mimicking peers and is clear on how it is defined, which comes through as strong governance. Given that its average five-year return stands at 16.85% per annum and 10.1% since inception in 2004, proof of its pedigree is in the numbers.

2015 winners already unveiled:

Institutional category

Reserves manager: Monetary Authority of Singapore

Sovereign wealth fund: GIC

Insurance company (general account): Ping An Life  

Public pension fund: Bureau of Labor Funds

Private pension fund 2015: Jardine Matheson

Endowment: National University of Singapore

Markets category

Australia/New Zealand: the Future Fund

Mainland China: China Life Insurance

Hong Kong/Taiwan: Cathay Life Insurance

Japan: Government Pension Investment Fund

Korea: Hanwha Life Insurance

Southeast Asia: Government Pension Fund (Thailand)

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