Long Term Investing in a Low Return World AUTHOR: Fiona Mackenzie - - PowerPoint PPT Presentation

TITLE: AUTHOR: EVENT | PRESENTATION:

Long Term Investing in a Low Return World

Fiona Mackenzie

NZSA National Conference, 12 September 2015

Head of Investments

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

Further details available at www.nzsuperfund.co.nz

0.8 1.3 1.8 2.3 2.8 3.3 3.8 4.3 4.8 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 Index

Cumulative Fund Return

NZSF Actual (Net of Fees) NZ T-Bills NZ T-Bills +2.5% Reference Portfolio

Lower Expectation (95% Confidence Interval) Upper Expectation (95% Confidence Interval) To 31 May 2015

Investment Approach: Endowments

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We can ride-out short term volatility

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Genuine contrarian investor

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We can invest in private market and illiquid assets

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We pay lower tax in some jurisdictions (sovereign status)

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Favourably regarded as a potential co-investor and business partner

Long Horizon Certainty of Liquidity Operational Independence Location & Crown Owner

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Investment Approach: Importance vs. Interest

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Investment Approach: What vs. How

Investment Approach: Costs Matter

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Market Environment: Lower for Longer

Market Environment: Lower for Longer

Market Environment: 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?

Hard mandate limits, fixed claims & slow-moving expectations almost guarantee distortionary behaviour.

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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