Santiago Principles Self-Assessment

New Zealand Superannuation Fund

Fund Details Fund Website Search Assessments PDF version
  • Pillar 1: Legal
  • Pillar 2: Institutional
  • Pillar 3: Investment
Principle 1

1. The legal framework for the SWF should be sound and support its effective operation and the achievement of its stated objective(s).

1.1. The legal framework for the SWF should ensure legal soundness of the SWF and its transactions.

1.2. The key features of the SWF’s legal basis and structure, as well as the legal relationship between the SWF and other state bodies, should be publicly disclosed.

The New Zealand Superannuation Fund (‘Fund’ or ‘NZ Super Fund’) is a pool of assets on the New Zealand Government’s balance sheet managed by an independent body, the Guardians of New Zealand Superannuation (‘Guardians’, ‘we’, ‘our’), with explicit commercial objectives and clear accountability. The legal framework for the Fund and the Guardians is clearly and publicly disclosed in the New Zealand Superannuation and Retirement Income Act 2001 (‘Act’). The Act is available in full online.

The Fund has a specific purpose, as outlined in our response to GAPP 2. The Fund will be used to help pay for the cost of making New Zealand Superannuation payments in the future. 

The Guardians is an autonomous Crown entity, which is a type of statutory body corporate established to carry out functions in respect of the Fund at ‘arm’s length’ from the Government. As a Crown entity, the Guardians is subject to the Crown Entities Act 2004, an umbrella Act covering all New Zealand Crown entities that operates alongside individual entities’ empowering Acts. The Crown Entities Act prevails over entities’ Acts in the event of any conflict, unless the entity’s Act expressly provides otherwise. The Crown Entities Act is available in full online.

Further information about the Crown Entities Act is available on the Public Service Commission’s website.  

An explanation of the Guardians’ operational independence from the New Zealand Government, our governance arrangements and responsibilities is available in the Governance section of our website. They are also explained in detail in our Annual Reports.

Our legislative mandate gives us considerable freedom to invest the Fund how we see fit. There are, however, some important constraints and restrictions in place. These are detailed on our website at Constraints.

The Guardians also manages an additional mandate - a domestically-focused venture capital fund, the ‘Elevate NZ Venture Fund’. The Elevate NZ Venture Fund currently consists of $259.5 million of Crown capital commitments, redirected from the NZ Super Fund.

The Elevate NZ Venture Fund is entirely separate to, and segregated from, the NZ Super Fund. While the Elevate NZ Venture Fund is not the subject of this assessment, we briefly summarise the mandate below.

The Guardians has responsibility for the Fund’s governance and oversight, and under the policy design the Elevate NZ Venture Fund is managed externally by New Zealand Growth Capital Partners Limited (NZGCP), another Crown entity, with a fund-of-funds model. The fund-of-funds model means that NZGCP makes investment decisions for the Elevate NZ Venture Fund, which invests into venture capital funds alongside other investors. The legal framework for the Elevate NZ Venture Fund is publicly disclosed in the Venture Capital Fund Act 2019, also available online.  The legislation for the Elevate NZ Venture Fund was developed so as to specifically preserve the operational independence of the Guardians vis-à-vis the NZ Super Fund. 

We don’t believe that the Elevate NZ Venture Fund meets the criteria for a sovereign wealth fund from the Santiago Principles, in particular the requirement for investment in foreign financial assets and the investment for financial objectives (given the additional objective of domestic venture capital market development included in the Venture Capital Fund Act 2019). As a result, this assessment focuses only on the NZ Super Fund. References to the Elevate NZ Venture Fund are included where it impacts on the governance structure of the NZ Super Fund.

Principle 6

6. The governance framework for the SWF should be sound and establish a clear and effective division of roles and responsibilities in order to facilitate accountability and operational independence in the management of the SWF to pursue its objectives.

The New Zealand Superannuation and Retirement Income Act 2001 establishes clear operational independence for the Guardians in its management of the NZ Super Fund and, in conjunction with the Crown Entities Act, establishes standards of public accountability. 

As an autonomous Crown entity, the Guardians is legally separate from the Government. This means that in respect of the NZ Super Fund, although we are still accountable to the Government, we have operational independence regarding investment decisions, with explicit commercial objectives as set out in the Act. The Guardians is not required to give effect to Government policy in respect of the NZ Super Fund. The Minister of Finance’s powers of direction concerning the NZ Super Fund are limited to giving directions regarding the Government’s expectations as to the NZ Super Fund performance which must not be inconsistent with the Guardians’ statutory investment objective. 

The Guardians is overseen by an independent Board. Board members are required by legislation to have substantial expertise in investment management and are appointed by the Governor General on the recommendation of the Minister of Finance. The Minister’s recommendation follows nominations from an independent nominating committee and consultation with representatives of other political parties in Parliament. Essentially, this means that the Guardians operates at ‘double-arm’s-length’ from the Government.

Principle 18

18. The SWF’s investment policy should be clear and consistent with its defined objectives, risk tolerance, and investment strategy, as set by the owner or the governing body(ies), and be based on sound portfolio management principles.

18.1. The investment policy should guide the SWF’s financial risk exposures and the possible use of leverage.

18.2. The investment policy should address the extent to which internal and/or external investment managers are used, the range of their activities and authority, and the process by which they are selected and their performance monitored.

18.3. A description of the investment policy of the SWF should be publicly disclosed.

Our legislation requires us to establish and adhere to a Statement of Investment Policies, Standards and Practices (SIPSP) for the NZ Super Fund that is consistent with the statutory objective of investing the Fund on a prudent, commercial basis and in a manner consistent with best practice portfolio management, maximising return without undue risk and avoiding prejudice to New Zealand’s reputation as a responsible member of the world community.

The SIPSP is reviewed annually and is publicly available on our website.

This link also provides access to the various policies that sit beneath the SIPSP and are referred to within it. The matters covered by the NZ Super Fund SIPSP include: the classes of investments in which the Fund is to be invested and the selection criteria for investments within those classes; the determination of benchmarks against which the performance of the Fund as a whole, and classes of investments and individual investments will be assessed; the balance between risk and return in the overall Fund portfolio; and the use of derivatives. 

Our Investment Risk Allocation Policy (which is publicly available at the above link) includes the investment constraints (risk appetite) set by the Board. Our governing legislation does not permit borrowing in respect of the Fund except with the consent of the Minister of Finance.

Our Externally Managed Investments Policy covers how we invest with external managers, including, manager selection, appointment, monitoring and reporting. Our Portfolio Completion and Internally Managed Securities Policy covers our use of internal mandates. These policies are publicly available at the above link.

We have also published to our website a series of white papers and informational videos and commentary, explaining various aspects of our investment process (including our Reference Portfolio, diversification, selection of asset managers, and our view of long-term investing). The in-depth commentary and videos on how we invest are here and the White Papers (and other disclosures) are here