NZ Super and ACC hit positive notes on impacts and losses

New Zealand’s two largest sovereign wealth funds have put impact investing on the agenda in a year when both reported losses above their benchmarks.

In their respective annual reports released last week, the NZ Superannuation Fund (NZS) and the Accident Compensation Corporation Foundation (ACC) have identified impact investments that will receive more attention in the coming years.

“We have developed a plan to increase the number and size of impact investments by the Fund and continue to integrate impact into our investment process. says.

“We intend to set the bar high for impact investing. For an investment to qualify as an impact investment, it must have a tangible, meaningful and credible impact that we measure and report. “

At the same time, the ACC’s report looks at progress on its impact portfolio, including a seed investment in a new $100 million climate change fund.

The ACC Climate Change Fund has made its first investment in Leaf Foods. “Leaft Foods is a startup that extracts a protein called rubisco from green leaf crops, giving farmers a way to diversify away from more carbon-intensive food production,” the report said. Another solar energy-based investment is expected soon.

“We have developed a framework for evaluating the impact of investing in this fund,” said the ACC report.

Impact investments typically drive a specific social or environmental goal as high as or higher than their financial return.

However, the 12 months to June 30th were generally difficult to see financial returns as both NZS and ACC posted losses of around -7% and -9.21% respectively. The latter represents his worst nominal performance in 20 years.

Despite the deficit results, two government-owned funds outperformed their benchmarks.

Both NZS and ACC attribute their outperformance in 2021/22 to their active management positions, but this differs significantly between the two funds.

ACC Chief Investment Officer Paul Dyer said in the report: Most portfolio returns, including domestic equities, fixed income and private markets, outperformed benchmarks. Global equities were the only major asset class to underperform, again with mixed results between value and growth managers.

“Adding more value to an investment than the benchmark return is a key performance metric for our team. In this regard, ACC has been very successful. , which equates to an added value of approximately $500 million, which outperforms long-term performance expectations from active management and represents solid results this year.”

Similarly, the NZS report found that active management, conducted through internal and external managers across multiple strategies, outperformed the reference portfolio’s return by approximately 6.71% over the 12-month period.

But for the $56 billion NZS today (which peaked at over $61 billion last year), total operating costs more than doubled to $278 million in 12 months. This is largely due to the surge in external manager performance fees from his $7.4 to his $131 million. 1 million in the previous reporting period.

As the number of staff increased to 188 (161 as of June 2021), the cost of NZS employees also increased by $10 million to $54.8 million, performance measures boosted bonuses, and the CEO ‘s Matt Winneley’s take-home pay surged to a record $1.4 million. .

“As a result, costs increased from 0.25% last year to 0.49% this year as a percentage of average net worth,” said the NZ Super report.

ACC investment costs increased slightly from $77 million in 2021 to $80 million. This represents his 0.15% of assets under management.

The ACC Fund took the biggest hit to the c.$10bn NZ bond portfolio. Interest rates soared, reducing his mark-to-market losses by nearly 12.6% over a 12-month period. As of June 30, 2018, his total assets under management have grown from over $50 billion to $44.8 billion.

Conversely, rising interest rates reduced the ACC’s overall long-term debt, leaving the no-fault accident insurance scheme largely intact even after accounting for investment losses.