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Speaker 1: The information provided in this program is of a general

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Speaker 1: nature and is not intended to be personalized financial advice.

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Speaker 1: We encourage you to seek appropriate advice from a qualified

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Speaker 1: professional to suit your individual circumstances. How the new CEO

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Speaker 1: of the seventy six billion dollars Superannuation Fund plans to

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Speaker 1: double its size in the next decade by the time

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Speaker 1: the government starts withdrawing money.

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Speaker 2: Our challenges probably are not that different from every other

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Speaker 2: business as you get larger and larger, so we need

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Speaker 2: to be able to remain nimble and agile.

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Speaker 1: Our sovereign wealth fund is now worth the record seventy

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Speaker 1: six point six billion dollars, up from sixty five billion

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Speaker 1: a year ago. The superfund has returned ten percent every

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Speaker 1: year before costs and after tax since its inception twenty

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Speaker 1: one years ago. Its portfolio mixes changed drastically over that time.

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Speaker 1: In two thousand and three, two thirds of its money

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Speaker 1: was enlisted equities, with just thirteen percent in other alternatives,

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Speaker 1: but now less than half as in equities and twenty

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Speaker 1: seven percent is in alternatives such as private equity, venture capital,

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Speaker 1: real estate, and infrastructure. It owns hotels and farms across

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Speaker 1: the country and as forty percent holdings in datacom insurer

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Speaker 1: Fidelity Life, and forestry company kunger or A Timberlands. It's

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Speaker 1: previously had interests in z Energy, Kimibank, and MetLife Care.

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Speaker 1: A recent law change could see it go even bigger

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Speaker 1: on direct investments. The Superfund is now allowed to take

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Speaker 1: controlling interest in other entities that could help it reach

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Speaker 1: the size Treasury projects doubling in the next decade to

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Speaker 1: around one hundred and fifty billion dollars, right on time

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Speaker 1: for the government to start withdrawing money to help pay pensioners.

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Speaker 1: An independent assessment of the fund release this week, set

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Speaker 1: its results over the past five years have been excellent,

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Speaker 1: but its returns going forward could be lower due to

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Speaker 1: geopolitical risks and excessive levels of sovereign debt around the world.

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Speaker 1: The report said the superfund required significant change from here

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Speaker 1: to keep its culture strong as it scales. It's had

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Speaker 1: a number of major leadership changes over the past few months,

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Speaker 1: with both the former CEO, Matt Wineray, and chief investment

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Speaker 1: officer both leaving the organization. So how does the new CEO,

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Speaker 1: Joe Townsend, plan to grow and lead the fund from here?

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Speaker 1: Joe lovely to met you. Thank you so much for

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Speaker 1: doing this today. Really appreciate it. Thank you for having

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Speaker 1: me stellar performance over the past year for the guardians

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Speaker 1: of the superannuation fund.

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Speaker 3: Largely that was though due.

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Speaker 1: To your allocation to equities, and anyone that was invested

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Speaker 1: in tech docs has clearly done well over the past

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Speaker 1: twelve months. How are you thinking about whether or not

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Speaker 1: that'll continue? Are you changing your allocation? Have you taken

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Speaker 1: some profits there?

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Speaker 2: International equities composed very large proportion of our portfolio, as

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Speaker 2: you rightly point out, so just a little bit below

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Speaker 2: fifty percent. So international equities returned over twenty percent last year,

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Speaker 2: and so they made a meaningful contribution to our return

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Speaker 2: of almost fifteen percent over the past year. Having said that,

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Speaker 2: we do have a lot of other investments in the

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Speaker 2: portfolio as well as part of our active portfolio, and

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Speaker 2: so what we're trying to do is to build a large,

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Speaker 2: diversified portfolio that basically is quite robust for a number

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Speaker 2: of different economic circumstances that might eventuate.

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Speaker 1: What he is talk about potential recisions around the world.

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Speaker 1: We are apparently already in one, according to the Reserve Bank.

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Speaker 1: How do you think that might affect stock markets here

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Speaker 1: and globally around the world going forward.

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Speaker 2: Well, one of our challenges as a true long term

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Speaker 2: investor is actually to build portfolios at a very robust

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Speaker 2: for the long term and not get caught up too

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Speaker 2: much in the noise of markets on a very short

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Speaker 2: term basis. And so there's been a lot of talk

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Speaker 2: around those extremely strong tech AI related stocks for a

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Speaker 2: number of years now, but they've continued to deliver very

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Speaker 2: strong returns and that certainly has been one of the

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Speaker 2: positive contributing factors to our returns over.

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Speaker 3: The past year.

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Speaker 1: So you're sticking with the tech stocks going forward, Well,

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Speaker 1: they're part of our reference portfolio.

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Speaker 2: So our starting position is to have a reference portfolio

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Speaker 2: which is eighty percent equities and twenty percent fixed income.

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Speaker 2: So that part of the portfolio is invested passively, and

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Speaker 2: so we don't see it as our competitive advantage to

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Speaker 2: make a call on particular stocks that are managed internationally.

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Speaker 1: Let's talk about the whole other half of the fund's portfolio.

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Speaker 1: You've got a lot of alternatives and their real estate, infrastructure, farms,

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Speaker 1: and direct investments. There's just been a changing to your

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Speaker 1: legislation which allows you now to take controlling interests and

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Speaker 1: direct investments and other companies. How are you thinking that

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Speaker 1: that might change the way you think or approach direct

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Speaker 1: investments from here?

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Speaker 2: Well, certainly from a governance perspective, we've put a lot

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Speaker 2: of work over the past couple of years in terms

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Speaker 2: of what additional depths we would need to take if

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Speaker 2: indeed we were to take a controlling interest in a

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Speaker 2: company in the domestic marketplace here in particular, it would

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Speaker 2: potentially allow us to take a larger stake in a company,

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Speaker 2: which could be very important as we continue to grow

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Speaker 2: over the decades to come.

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Speaker 1: Are there any investments that you're considering at the moment

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Speaker 1: that you're thinking, Wow, this is actually our conviction on

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Speaker 1: this is high. We could take a ninety percent stake

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Speaker 1: or something like that.

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Speaker 3: So not at this particular point in time, but I'm sure.

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Speaker 2: Over the next years that are ahead of us, we

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Speaker 2: will have those conversations.

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Speaker 1: Look forward to seeing it. Private equity is interesting. Obviously

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Speaker 1: the funds has done very well out of its private

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Speaker 1: equity allocations. Therese now talk about key we Saber Funds

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Speaker 1: in this market also being allowed to get into private

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Speaker 1: equity to enjoy the returns The likes of the super

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Speaker 1: fund have had. But if key WE SAB funds domestically

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Speaker 1: are going to invest in more private equity options, does

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Speaker 1: that pose a competitive challenge to the super fund.

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Speaker 2: Or I think it's actually more of a liquidity challenge,

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Speaker 2: particularly for those WE save funds. And I have a

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Speaker 2: little bit of experience here, having come from the Australian

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Speaker 2: superannuation industry, where there are reasonably high allocations.

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Speaker 3: To those illiquid assets.

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Speaker 2: One of the reasons we can invest in long term

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Speaker 2: investments such as infrastructure private equity is because of our

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Speaker 2: true intergenerational mandate where the fund is projected to double

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Speaker 2: over the next ten years and is modeled by Treasury

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Speaker 2: to be one hundred and eighty five bid in by

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Speaker 2: about two than forty. So I'm not so sure it's

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Speaker 2: a competitive challenge for us. I mean, we're already competing

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Speaker 2: with other large institutional investors in the global.

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Speaker 3: Marketplace for opportunities.

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Speaker 2: I would say that it's probably more liquidity consideration for

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Speaker 2: those actual key WE providers.

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Speaker 1: Do you think that they might find that to challenge

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Speaker 1: themselves then, because when now that private equity is a

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Speaker 1: liquid people will want to withdraw the key WE Saver

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Speaker 1: sooner and the government will want to withdraw from the

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Speaker 1: super fund. Do you think that they're kind of about

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Speaker 1: to head a realization?

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Speaker 2: So I'm probably not in a position where I can

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Speaker 2: comment on the capabilities of those who are managing the

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Speaker 2: key we saver funds at this point in time. I

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Speaker 2: have only been in the country for five months.

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Speaker 1: You have, yeah, So I totally appreciate that infrastructure is

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Speaker 1: obviously interesting. There's an allocation to that from the super

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Speaker 1: fund already. But this government, you know, will obviously want

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Speaker 1: to solve our infrastructure deficit. It's going to be expensive.

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Speaker 1: The super fund prefers public public partnerships. What opportunities do

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Speaker 1: you see there to help fund infrastructure with this new government.

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Speaker 2: So, as a true long term investor, we are always

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Speaker 2: interested in potential infrastructure investments. Under our legislation, we must

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Speaker 2: invest on a prudent commercial basis, and we have operational independence,

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Speaker 2: which has been a very important contributor to our success

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Speaker 2: over the longer term. So we will engage on any

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Speaker 2: potential investment coming into our portfolio, but we will make

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Speaker 2: the decision, as I said, on a prudent commercial basis.

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Speaker 2: If I just think about one of the examples of

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Speaker 2: an infrastructure asset that we are currently investigating here in

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Speaker 2: New Zealand, the Taradarchy offshore wind project. We are an

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Speaker 2: infrastructure investor, we are not an infrastructure developer, and so

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Speaker 2: in that instance we have actually partnered with Copenhagen Infrastructure

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Speaker 2: Partners and it's that sort of joint venture that we

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Speaker 2: will always look to put in place to investigate infrastructure opportunities,

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Speaker 2: whether it be in New Zealand or offshore.

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Speaker 1: So in that type of opportunity, you wouldn't develop the asset,

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Speaker 1: but you would in a way bank roll it and

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Speaker 1: then earn the return when it's sold.

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Speaker 2: Well, the Copenhagen Investment Partners actually has experience with the

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Speaker 2: development work. So and it's those sorts of joint ventures

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Speaker 2: where we have an operating partner that has both the

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Speaker 2: operational experience and the potential capital that we always look

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Speaker 2: to do a joint venture with.

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Speaker 3: So you know there is work underway there.

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Speaker 2: It's a very complex project, but it's those sorts of

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Speaker 2: arrangements that we look to put in place before we

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Speaker 2: have to make a decision as to whether or not

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Speaker 2: we're going to contribute our capital.

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Speaker 1: This fund is prejected to double in the next ten

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Speaker 1: to twelve years to just over one hundred and fifty

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Speaker 1: billion dollars, about the same time as when the government

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Speaker 1: is going to want to start with drawing some money

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Speaker 1: out of this fund. What are the challenges that you

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Speaker 1: foresee the super Fund facing as it doubles in size.

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Speaker 2: So our challenges probably are not that different from any

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Speaker 2: other business as you get larger and larger.

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Speaker 3: So we need to be able to remain nimble and agile.

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Speaker 2: We need to make sure that our processes are scalable,

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Speaker 2: and one of the key ways that organizations like this

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Speaker 2: do that is through the efficient use of technology. And

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Speaker 2: so we're currently doing a large piece of work around

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Speaker 2: enhancing our investment, data and technology capabilities. And so that's

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Speaker 2: one example. Culture is another key component of organizations like this,

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Speaker 2: where you need to make sure that you know, people

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Speaker 2: continue to be highly engaged in the work that we do,

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Speaker 2: and you know, we can attract smart people doing really

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Speaker 2: interesting jobs.

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Speaker 1: Do you think that the super Fund's current portfolio max

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Speaker 1: is right for that? Dublin, as you say, in less

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Speaker 1: than half to international and domestic equities about tenberce, direct

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Speaker 1: investment about a quarter and alternatives. Do you feel like

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Speaker 1: that needs to change or it's good where it is.

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Speaker 3: Look Undoubtedly, it will change over time.

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Speaker 2: And I think if you look at the evolution of

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Speaker 2: the portfolio since it was first invested in two thousand and.

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Speaker 3: Three, you will have gradually seen quite a few changes.

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Speaker 2: So undoubtedly the question to that is, yes, do I

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Speaker 2: know what that looks like today?

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Speaker 3: I don't have a crystal ball, I'm afraid.

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Speaker 2: What I would say is though we are the investment team,

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Speaker 2: I have a large, strong investment team. We have about

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Speaker 2: seventy people, and so you know their job day to

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Speaker 2: day is to continually look at all the investments we

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Speaker 2: have in the portfolio today could be the next best

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Speaker 2: idea to actually come into the portfolio. On top of that,

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Speaker 2: on a five year basis, we are doing a reference

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Speaker 2: portfolio review. Effectively, the reference portfolio is the starting position

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Speaker 2: for every investment opportunity. So effectively, it's an expression of

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Speaker 2: the Guardians the board's risk appetite statement.

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Speaker 3: It's very growth oriented.

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Speaker 2: It's eighty percent equities, twenty percent fixed income. And the

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Speaker 2: idea is that you know that is the risk profile

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Speaker 2: that is appropriate.

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Speaker 3: For true long term investors such as the Guardians.

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Speaker 1: You've come from the Australian superanuation industry, which has done

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Speaker 1: far better than New Zealand's entire superranuation industry. Correct me

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Speaker 1: if I'm wrong, but it's worth about three point six

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Speaker 1: trillion dollars in Australian dollars, which is incredible compared to ours.

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Speaker 1: What do you think we can learn coming from across

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Speaker 1: across the ditch. What do you think that we need

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Speaker 1: to catch up on that Australian has bid.

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Speaker 3: Us at so far?

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Speaker 2: Well, of course, it's a very different environment in Australia

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Speaker 2: because superannuation contributions are mandated and with that, over the

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Speaker 2: years that I was working in that industry, you know,

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Speaker 2: there has been an enormous increase in regulation over that

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Speaker 2: time and so you know, it is a different environment

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Speaker 2: here in Australia. I'm sure there are lots of lessons

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Speaker 2: that could be learned. You nominated one of them yourself being,

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Speaker 2: you know, potentially increased investment in unlisted assets.

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Speaker 3: But yes, so the Australian superannuation industry.

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Speaker 2: Is is, you know, it's it's matured a lot over

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Speaker 2: the past twenty or thirty years, but with that has

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Speaker 2: come increasing regulation and focus in terms of member expectations

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Speaker 2: for how those funds will be invested.

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Speaker 1: Just looking at your financial statement for the year just ended,

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Speaker 1: the government contributions were one point six billion dollars that

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Speaker 1: you paid back one point five billion in tax, so

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Speaker 1: nit you barely got anything. The last CEO, Matt Winery,

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Speaker 1: told me that that was pretty dumb that you had

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Speaker 1: to pay tax. How do you feel about it, Joe.

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Speaker 3: Well, obviously that's a question for the government.

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Speaker 2: Look, we at the end of the day, if we

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Speaker 2: were not paying tax, it would create cost savings and

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Speaker 2: efficiencies for us, and you know, the actual size of

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Speaker 2: the fund would increase over time if that withdrawal was

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Speaker 2: not being made. But as I said at the day, that's,

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Speaker 2: you know, something that's for the government to decide.

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Speaker 1: It would be much easier to get to that one

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Speaker 1: hundred and fifty billion dollar size, doubling in size if

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Speaker 1: you didn't have to pay tax.

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Speaker 2: Though, well, that that number is based on Treasury is

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Speaker 2: current modeling, so I would assume that it actually does

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Speaker 2: incorporate the tax. So yes, fundamentally your comment is correct,

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Speaker 2: the fund would grow larger over time.

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Speaker 1: Thank you so much for your time, Joe. I love

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Speaker 1: it to met you, I'm sure we'll do this again.

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Speaker 3: Thank you,