The $30 billion New Zealand Superannuation Fund is the best performing sovereign wealth fund over the past five years, generating returns of more than 17 per cent a year.
Those returns easily beat all other sovereign wealth funds that publish their figures, according to a global study by JP Morgan.
In the last three years alone, the fund returned an average of 21 per cent a year.
But the NZ Super Fund says some markets were now looking "expensive" and it was pulling its horns in, sticking much closer to its long-run core investments and shying away for investing more in dairy and forestry in New Zealand.
Guardians of NZ Super Fund chairman Gavin Walker said recently that the last few years were likely to have been the best for some time, and longer-term returns would be much lower on average.
In the year to April this year, the Super Fund made returns of 18.4 per cent, with annualised returns of 17 per cent over the past five years.
Super Fund Chief Investment Officer Matt Whineray said while they would "take the compliment" from the JP Morgan study, the returns also reflected the "risk tolerances" they were willing to run, with a long horizon for investment returns.
"Our board has chosen to take a reasonable amount of risk in the portfolio, but the period we have gone through has seen us return ahead of expectations because markets have been very strong," he said, since the depths of the global financial crisis.
But the fund had also made better returns than they would have seen with a benchmark portfolio.
A "chunk" of the strong performance reflected a generally rising tide for shares, with a benchmark portfolio which had risen about 15 per cent a year in the past three years, while the Super Fund had achieved 18.8 per cent.
"There has definitely been a rising tide.. but then we have done better, adding value over and above that (benchmark)," Whineray said.
The fund had "leaned in" when they thought markets were cheaper, so buying more shares in the depth of the GFC and holding more shares than normal.
While there had been a rising tide in the past, the investment picture was now "far less attractive" than in recent years, so they had reduced the gap between their portfolio and the benchmark "reference" portfolio.
"We think the environment is a lot less rich or attractive in terms of opportunities than it has been," Whineray said. "Going forward it would be great to have these (high) returns, but we don't expect them.... and we think some markets are definitely expensive," he said.
Fixed income markets were "very expensive" and some share markets were also "fair value or above fair value" and few were "obviously cheap" he said.
The portfolio is spread around the world, mainly in the United States and Europe, but with 14 per cent of so in New Zealand, including both shares, forests and farms.
One of the fund's standout performers in the past year has been listed petrol company Z Energy, with its shares up 56 per cent. The Super Fund holds 20 per cent of Z.
Farms and forests had done well, but they were lower risk and hard to compare with global shares, Whineray said.
But with both dairy and log prices down heavily in the past year, lower returns were expected in the future.
"We have not been actively acquiring dairy farms in the past couple of years, because we have struggled to see value. But in the longer term we think both (farms and forests) are good diversifiers for us," Whineray said.
The so called "Cullen Fund" was set up in 2003 to help pay for the retirement of a legion of baby boomers, but government contributions stopped in 2009 and are not expected to resume till about 2020 once government debt levels have fallen further.
If government contributions to the NZ Super Fund had not been suspended, the fund would be worth an estimated $47 billion, 58 per cent more than it is now.
Walker said there was political agreement about the need to re-start contributions to the fund, but different views on the timing of that.
The second-best wealth fund around the world was GIC, the Government of Singapore Investment Corp, which had annualised returns of 12.4 per cent and has a similarly longterm investment horizon.
NZ Superannuation Fund
Where is the money?
The fund's investment strategy is tilted toward riskier growth assets, meaning its monthly performance can jump up and down.
About 14 per cent of the fund's investments are in New Zealand.
Top New Zealand listed stocks held include Z Energy (shares worth $418m), Metlifecare ($205m), Fletcher Building ($143m), F&P Healthcare ($116.7m), Meridian Energy ($105.6m).
Top holdings in international companies include Apple, ($190m) Zurich Airport, ($125m) Microsoft ($91m) and ExxonMobil ($90.8m).
NZ Super Fund has a 20 per cent holding in Z Energy which has been a stellar performer, with its shares up 56 per cent in a year.
New Zealand investments in the super fund are worth almost $4 billion or more than 14 per cent of the overall portfolio.
The fund had received contributions worth $14.88b from the taxpayer since it was set up.
It made total returns of more than $19 billion since starting, and paid out $4.6 billion in tax.
The Super Fund earlier in the year revealed it had written off a loan to a Portuguese bank worth almost $200m.