Institutional investing is on the cusp of a structural reset as advances in blockchain-based technologies rewire the market plumbing that underpins asset ownership.

This next generation of infrastructure will operate continuously with near-instant settlement across traditional and newly tokenized assets, according to Franklin Templeton executive vice president and head of innovation Sandy Kaul.

“By 2030, every market and every asset settles instantly,” she told the Top1000Funds Fiduciary Investors Symposium at Stanford University, adding that portfolios will become highly customised “portfolios of one” tailored to each institution’s goals, liabilities and cashflow needs.

Kaul pointed to the recent passing of the US GENIUS Act, which marked the United States’ first major legislative step towards regulating stablecoins, as “the starting gun on a complete transformation” towards a wallet-based system that will replace today’s account-based system.

“This is a huge threat to banks – this stablecoin act – and this is just the beginning. But it has created a parallel economic system now and that parallel economic system is going to recreate everything that we have in the current system.

“There is going to be cash sweeps between stablecoins and tokenised money market funds so that you can manage your cash in the wallet-based system. There are going to be new investment options where I can now create liquidity around illiquid investments that I hold in my portfolio by tokenising interests and shares in them.”

Rest Super head of portfolio construction, external equities, Chris Drew, said the Australian pension fund held about 1 per cent of its global equity portfolio in US dollar denominated cash with a custodian.

“We’re looking at can we replace that custodial-held cash with a tokenised money market fund? And there’s our use case where we can get far superior yields. We get instant settlement and we get the added benefits of the intraday yield that you get… we said, ‘here’s a problem to solve. Let’s go and look at a number of ways we can do that’. That led us to tokenisation.”

Kaul said the technology underpinning its tokenised money market fund allowed investors to receive a proportionate share of interest for the exact time they were invested.

“If you owned a tokenised money market fund for three hours of the five hour or the eight hour trading session, you will get that proportionate share of the day’s interest, and we are paying that interest out every single calendar day of the year.”

But such a radical change to the market’s underlying infrastructure also challenges existing governance approaches.

CFA Institute CEO and president Marg Franklin said the tokenisation of assets will change their characteristics and also drive returns. Many asset owners will need to consider these interconnections, particularly on illiquid assets such as infrastructure.

“You have to determine, is your valuation methodology accurate, what does it look like, and then how does that impact your performance measurement and what you’re reporting to beneficiaries or to your board?

“The responsibility for due diligence, and the sort of accuracy of your due diligence is going to increase, and the complexity of that due diligence is going to increase.”

Drew said tokenising real world assets would create a new operating environment – one that Australian regulation had yet to catch up to.

“You’ve  got to completely re-imagine how you think about your investment structure and that’s what we’re grappling with.”

Separately, Drew said the fund was also now increasingly using AI as part of its investment decision making process including to more accurately and quickly distil information and action items from manager meetings; to perform deep research and identify market thematics; as well as data analytics.

For example, AI can predict index rebalances or produce insights about shifting correlations in near real-time.

“Everyone talks about the Mag Seven. We would argue there is no Mag Seven… at some point in time, there’s a Mag Three, at some point in time, there’s a Mag Five. These correlations move around through time, and so that’s information for us as well – how exposed you want to be to these correlated groups of stocks.”

Be part of the conversation next year – register now for the Fiduciary Investors Symposium Stanford 2026. Asset owners only.

Our next event is at the University of Oxford, November 4-6 2025. Register today – asset owners only.

The two Thinking Ahead Institute articles I read the most are closely connected.

The 4-3-2-1 PIN code for a more sustainable economy highlights the roles of public policy (four units), corporations (three units), investors (two units) and individuals (one unit) in driving meaningful change. It emphasises the importance of collective effort and shared responsibility to achieve a more sustainable economy. The number assigned to each party represents their power to create an impact, with public policy having the greatest influence.

Written at the same time, Tim Hodgson’s article, If you want to see change, you can stop counting at ‘3’ is by far one of my favourites. It argues that relying on public policy to lead sustainability efforts is misguided, using the historical example of slavery abolition to demonstrate how change often starts with individuals and other sectors.

Corporations, the investment industry, and individuals must take the lead in experimenting and innovating, while public policy should later enforce best practices to ensure widespread adoption.

Despite the increasing evidence of the climate emergency, most of us seem complacent as our planet moves rapidly toward a 2C+ scenario. This widespread inaction can lead to feelings of hopelessness and climate depression among those actively trying to make a difference, creating a negative cascading effect.

What caused the inaction?

Part of this can be explained by the sociopsychological phenomenon known as the diffusion of responsibility, where members of a group feel less responsible when facing a shared problem.

Psychologists John Darley and Bibb Latané conducted research on this phenomenon. They set up an experiment involving a simulated distress call, making it seem as though someone nearby was injured. When participants believed they were the only ones who heard the cry, 85 per cent responded to help.

However, if participants thought one other person had also heard the call, only 62 per cent helped. When they believed four others had heard it, just 31 per cent took action.

The size of the bystander group is a key factor in the diffusion of responsibility. The individual need to intervene decreases as the group size increases.

With a world population over 8.1 billion, it’s clear how the diffusion of responsibility contributes to our inaction on the climate crisis.

However, we can’t not afford to just passively observe the unfolding climate disaster and hope that policymakers can be the superheroes. As Tim pointed out in his blog, more action needs to come from the six units (corporations, investors and individuals).

So, how do we overcome the barriers created by the diffusion of responsibility?

Finding a way through

Darley and Latané suggested there are five steps people go through before helping, which we can connect to addressing inaction in the climate crisis. Failing at any of these steps can lead to inaction.

Step 1 – Noticing the event
In 1950, global CO2 emission were six billion tonnes. The estimated level in 2024 will exceed 40 billion tonnes and is yet to peak. But people can’t taste, see or smell CO2. So these numbers mean little to most of us. Communication about the climate crisis needs to tell a story and build an emotional connection with the receivers, whether they are the general public, investors, or corporations.

Step 2 – Interpreting the event as an emergency
Our ancient human brain isn’t good at dealing with long-term problems. Primarily focused on immediate dangers, our brain fails to recognise the climate crisis as a threat. The urgency of acting now and the consequences of delaying must be emphasised more clearly (read the Thinking Ahead Institute’s paper, Pay now or pay later? discussing the need to address climate change sooner).

Step 3 – Feeling a sense of responsibility to take action
We’ve seen this play out in corporate commitments to net-zero targets. While many companies pledge to reduce emissions, too often the responsibility is perceived as collective, leading to delays in implementation. Accountability mechanisms, like transparent reporting and external validation, are essential to reinforce that responsibility is both shared and individual (such as senior leaders).

Step 4 – Deciding how to help
The path to action is clearer when people know what steps to take. For example, many investors struggle with integrating climate considerations into portfolios in a practical way. Initiatives like the Institutional Investors Group on Climate Change (IIGCC) and its Net Zero Investment Framework provide investors with a structured approach to setting targets and aligning their portfolios with net-zero goals, helping them decide where to prioritise their efforts.

Step 5 – Having the skills to carry out the action
Even with the will and sense of responsibility to act, a lack of skills remains a barrier. Knowledge development and skill-building are essential to address this. Various industry bodies and organisations offer online courses to assist investment professionals to make informed decisions. Such as TAI’s systems curriculum, which provides investors with practical tools to apply systems thinking, helping them address systemic risks.

Any issue that requires behaviour change is difficult to overcome.

In the latest Marvel superhero movie, Deadpool needs the right Wolverine to save his world. However, his world wasn’t saved by Wolverine alone, Deadpool played an equally important role – but had to change behaviour to achieve this.

Similarly, no single group can solve the climate crisis on its own. Progress requires a collective effort across individuals, investors, corporations, and policymakers to move the needle on one of the world’s greatest challenges.

Jessica Gao is a researcher at the Thinking Ahead Institute at WTW, an innovation network of asset owners and asset managers committed to mobilising capital for a sustainable future.

Artificial intelligence will boost corporate productivity and cut costs over the next five years before triggering sweeping job upheaval and an extinction event for many blue-chip companies, according to legendary venture capitalist Vinod Khosla.

“The next five years will look very decent from a corporate point of view: increasing productivity, reducing costs, increasing GDP growth, increasing abundance generally,” Khosla told the Top1000funds.com Fiduciary Investors Symposium at Stanford University.

“But in that process, well before 2030 – and people find this shocking – at least 80 per cent of jobs could be done 80 per cent by an AI. So roughly two-thirds of all jobs in the economy like the US – and I mean all jobs: farm workers, line cooks in restaurants, kitchens, home chefs.”

As an example of what’s coming, he cited a company generating $100 million in annual revenue that has already replaced its entire accounting team with one person thanks to an AI-based enterprise resource planning (ERP) system that can do what “armies of accountants” once did.

“We have companies proposing to us they do the same in HR, and every other function in customer support,” he said.

While initially positive, that wave of AI-charged productivity improvements will then usher in a decade of social disruption from 2030 to 2040, and large-scale layoffs.

“By 2035, we will have two things happen at a macroeconomic level: a hugely deflationary economy, which will violate all our assumptions because the production of goods and services will go way up, but pricing will go way down because the marginal cost of production has declined so much. Nobody, no economist, is counting on these phenomena, and that’s why I think assuming you don’t know [the future] is a far superior strategy to assuming you believe these forecasts.”

Khosla’s long track record includes investments in companies such as Google, Amazon, Square, Stripe, Affirm, and DoorDash, and his VC firm was the first to invest in OpenAI. Many of the companies he has backed have upended entire sectors of the economy and he foresees the power of AI speeding up that trend.

About 25 companies a year drop out of the Fortune 500 list – a pace that will at least “triple or quadruple by 2035”.

“It’ll be a very fast extinction rate for Fortune 500 companies because of the phenomena we talked [about] and that’s a macroeconomic trend not even remotely talked about.

“If any of you invested in the BPO industry or IT services industry, almost certainly, or customer support, most of that will disappear in the next five years, and those are very large segments today.”

While the decade ending 2040 will be disruptive, the next period will be more stable, but only if governments reassess and change the way they redistribute wealth.

“I think mostly politics will determine what policy gets instituted. That will then constrain AI country-by-country. I think all post 2040 – which is only 15 years away – you’ll see increasing abundance at a level where there’ll be ways to satisfy lots and lots of people if we sign up to redistribute wealth in particular ways, which is also a tricky issue.”

Silicon Valley: a mindset, not a place

Khosla’s broader investment view prizes improbable breakthroughs over linear forecasts, and embracing risk.

“I literally tell people, if you want to reduce risk, go to New York. I’m not going to fund somebody whose goal is to reduce risk. And most people in most parts of the world in business try and reduce risk of failure, but what they do in the process is reduce the consequences of success.

“I’d rather live in a world where I don’t mind a high probability of failure if the consequences of success are consequential – and that’s fundamentally the difference. I’ve seen many investors in the venture business in Europe and elsewhere, they’re trying to reduce risk. They turn great ideas into decent ones.”

He said the success of startups was fundamentally tied to the quality of the team rather than the initial business plan.

“I would guess less than 5 per cent of the companies five to 10 years after they started, are following the plan they presented when they first got funded. So mostly what they’re doing is iterating – tacking left, tacking right – essentially heading in the best direction of flow. That depends on the quality of the team they assemble.”

Khosla is continuing to back big ideas, including nuclear fusion.

“There is no expert who’s forecasting fusion to be proven,” he said. “So another rule I use is most people assume improbables – and this is true of your investing – are unimportant. I argue only the improbables are important… we just don’t know which improbable.”

On energy, he said China’s annual solar-cell manufacturing revenue – roughly $500 billion to $600 billion by his estimate – is now comparable to the size of the US oil industry, a scale few would have predicted a decade ago.

Khosla described Silicon Valley as a mindset where the deep sector experience of established industry executives is viewed as a handicap to innovation.

“I can’t think of a single example in 40 years where somebody who knew a space innovated in it. Could you imagine somebody from Hertz or Avis innovating on Uber or somebody from Hyatt or Hilton innovating in Airbnb, or somebody from Walmart or Target innovating like Amazon did, or somebody like Lockheed or Boeing – pick your favourite airspace company – innovating like SpaceX and Rocket Lab did?”

“I go back to if you have 1000 startups you don’t need to know the 990 that will fail. You just need to be in the curve on the 10 that succeed… and that’s where getting the right teams in these startups matters.”

Be part of the conversation next year – register now for the Fiduciary Investors Symposium Stanford 2026. Asset owners only.

Our next event is at the University of Oxford, November 4-6 2025. Register today – asset owners only.

Global investors face the difficult task of setting asset allocation in an environment where the global macro-economic backdrop suggests chaos and downside risk, but markets continue to perform strongly. 

Michael Hunstad, president of Northern Trust Asset Management, told the Fiduciary Investors Symposium at Stanford University that investors have “a very, very tough situation in front of us” to reconcile those apparently contradictory scenarios. 

“You have this strange situation of a lot of turmoil in the backdrop, both from an economic and a political perspective; but you also have this shooting-the-lights-out kind of performance in most major asset classes,” Hunstad said. 

“So how do we deal with that? Our house view is that the world currently has fat tails on both sides. Clearly, there’s a lot of downside risk, but there is an equal amount and probably even more, of an upside risk inherent to the markets as well.” 

Hunstad said that a striking characteristic of the US economy is that about 70 per cent of GDP is consumption based, which is not unusual for a developed market, but “within that 70 per cent a large portion of that consumption accrues to the top, call it, one or two quintiles of wealthiest consumers in the country”. 

Hunstad said equity markets have risen 60 per cent over the past two years; interest rates are increasing, which means interest income is on the rise; and home prices generally have increased. 

“Those top quintiles of the wealthiest consumers in the United States are wealthier than they have ever been by a huge margin,” he said. 

“Some estimates suggest between about $120 trillion in total wealth prior to Covid, now about $180 trillion, so a 50 per cent increase in total wealth. Why does that matter? Because that, in our view, is the gas tank for growth going forward.” 

Stefano Cavaglia, senior portfolio manager, total portfolio management, at the State of Wisconsin Investment Board told the symposium that “equity exposure is something you want in the long run; the question is, what do you do in the short run to mitigate any of these risks?” 

“I think it’s clear, from what we’ve observed and what we’ve heard that the so-called tail risk is more significant now,” he said. 

“Tail risk is often shunned as a good way to lose money on an ongoing basis, and we’ve actually spent quite a bit of time thinking about it.” 

Clear on risk 

Cavaglia said that to protect portfolios against tail risk, investors need to be clear on what the actual risk is that they are seeking to hedge, remember that a hedge cannot be static, and understand managers exhibit skill (or lack of it) in hedging just as much as they do in asset allocation or stock selection. 

“Are we trying to hedge an unusually large event or are we trying to hedge something in the short run, and a small event? How you structure that hedge is critical to the cost that you incur,” he said. 

“The second [point] is that these things are not set-and-forget. There’s a temptation to say, ‘Oh, I put my hedge on, and I’m done’. No, we’ve found out that, essentially, how you rebalance in the event of a drawdown is quite important.  

“And there is, across managers who do this type of work, varying skill, and that is something you can actually quantify on how they reap those extra returns and how they rebalance those losses or those gains, whichever one they may be.” 

Benoit Anne, senior managing director and head of market insights at MFS Investment Management, said “all those tensions and frictions and geopolitical risks that we’ve heard about… have two major investment implications”, the first being to underline the importance of global diversification. 

“What we’ve learned this year is the US can actually be a source of major policy uncertainty, macro-volatility, and in the context of maybe a weakening dollar, some have learned the hard way a global diversification approach makes total sense,” he said. 

“The second massive investment implication of all those tensions is that it reinforces the case for active management, all that volatility, all that tension, creates differentiation, creates divergences, unsynchronised macro cycles, and all that can actually offer opportunities for an active asset manager.” 

Cavaglia said investors can’t be certain about the future. All they can do is make as highly educated guesses as possible and remain cognisant of the fact that they do not have all the answers. 

“I want to offer, more than anything, a framework for how to think about these things,” he said. 

“Right, now, there are multiple theories about whether an asset is overvalued or undervalued, and I can come up with lots of stories, and they’re all fair. The way I’ve approached the problem over the years is [to accept] I don’t know what the theory is. 

“If I look at history, I scratch my head and I go, I can’t find a model that can explain these events, right? So then I say, okay, fine, what do I then do?” 

A century of data 

Cavaglia said there is about a century of data that describe previous “unusual” or “alternative” events, which takes investors back to “this tail question: the tail matters to different people in different ways”. 

“There’s no shortcut. I don’t have the magical model. I don’t have the magical utility function. The way we approach this is, here’s a bunch of portfolios. Here’s what can happen to you in the short run, and here’s what can happen to you in the long run. And you have to, or an investment committee or other, have to balance those trade-offs.” 

Hunstad said Northern Trust’s asset allocation is “certainly risk-on [but] it does not mean that we can be complacent about risk [by] any stretch of the imagination” 

“I would say, to Benoit’s comment, we are still very much in the diversification camp as well, recognising that there is macroeconomic inconsistency across countries that there hasn’t been in a very, very long time. We want to take advantage of that same thing as well. There’s a big, big, big, fat tail on the left, and we’re very cautious about that. We want to basically construct our portfolios to minimise that as much as we can.” 

Anne said that, at the risk of contradicting his earlier view that he did not want to be over-exposed to the US, “I strongly believe there’s a strong bullish case for the US long-term”. 

“Do I believe that the country is going through a productivity miracle? Yes, I do. I believe that the long-term growth potential in the US is higher than in any other developed markets,” he said. 

“Do I believe that maybe indeed, the valuation story in the US is actually debatable over the long term? Yes, I do. 

“There’s a strong case for long term US equity exposure. It’s just that the near term doesn’t look that great.” 

Be part of the conversation next year – register now for the Fiduciary Investors Symposium Stanford 2026. Asset owners only. 

Our next event is at the University of Oxford, November 4-6 2025. Register today – asset owners only. 

Most investors are getting their exposure to AI and other big technology themes through the public markets, and typically through passive exposure to the Magnificent Seven. But Prabhu Palani, CIO of the $10 billion City of San Jose Retirement System, says that the innovation investors should really want to tap has to come from the private markets.

“These entrepreneurs are risk takers, and those risk takers are meeting risk capital,” Palani told the Top1000funds.com Fiduciary Investors Symposium at Stanford University.

“And that magic happens here in the Valley and in other parts of the world. That incubation has to happen in startups and early-stage startups. What large companies do well is scale that innovation, right? They have deeper pockets, they have transparency, they have access to resources.

“Once that breakthrough has happened, how do you scale those businesses? Being in the public markets is all about scaling… but if you want breakthrough technology, it has to come from this ecosystem.”

About half of the plan Palani manages is in public equity; roughly half of that is in the US, and mostly passive. It’s been “automatically getting a lot of exposure” to the biggest components of the index. A quarter of the total plan is in private assets, with five per cent of that – or a quarter of that quarter –  allocated to venture capital.

“We’re here in the Valley, which we believe gives us an edge,” Palani said.

“I’m 20 minutes from Sandhill Road, and that is just tremendous. For some time there was talk that, you know, the centre of gravity is shifting away from the Valley. But come AI – it’s all here. It’s at Stanford, it’s at Berkeley, it’s at San Jose State, it’s at UC Santa Cruz and so on.”

But Nick Rubinstein, managing director at global investment firm Jennison Associates, thinks that “innovation in the public space is definitely not dead”.

“Just recently, Google released their newest imaging model,” he said.

“They call it Nano Banana, and it’s an amazing product – and suddenly, in the app store, ChatGPT dropped into the top 10 and Google’s AI system for imaging immediately popped to number one, and the order of download increases was [significant]. So I think it might be somewhat short-sighted to take all of this innovation that’s happening in the private markets and say that these companies will become the next leader.”

Jennison Associates plays almost entirely in the listed equity space, and was an early investor in Tesla, though it does meet with private companies too. But the amount of capital that the listed incumbents have is “still massive, and they are still innovating”, Rubinstein said.

“Going back to the Mag Seven, you think about what they started as and what they are now; they’ve successfully transitioned their business models one, two, even three times. And I don’t think that trend is over.”

Jackson Garton, CIO of Makena Capital, which provides investment services to asset owners including endowments, family offices, pension funds and sovereign wealth funds, says that the firm is a “big believer” in the innovation coming out of the private markets space, but there’s also the “liquidity component of the equation” to consider.  OpenAI is a $500 billion company, but it’s still relatively illiquid.

“From a plan perspective, from an asset owner perspective, that’s a big shift,” Garton said.

“Time to IPO has at least doubled over the last 10 years. The whole equation doesn’t work if you don’t get your money back, and the liquidity part of the equation, which has been stressed as of late, is something to be very cognisant of when you think about your asset allocation models and how much you can take within venture.

“If you just plug it into a traditional mean variance optimisation model, it would say put 75 to 80 per cent into venture capital. And you can’t run a plan that way.”

Be part of the conversation next year – register now for the Fiduciary Investors Symposium Stanford 2026. Asset owners only.

Our next event is at the University of Oxford, November 4-6 2025. Register today – asset owners only.

As NZ Super nuts out growing pains in processes and technology, it has made some recent decisions to change its governance route. Among them is the appointment of two co-CIOs who will lead the investment team together with collaborative decision-making and shared accountability. In a wide-ranging interview, co-CIOs Brad Dunstan and Will Goodwin tell Top1000funds.com about the fund’s “co-delegation” model, how its total portfolio approach will evolve under their leadership, and where it is hunting for new alpha sources. 

New Zealand Super has long been touted as a fund with best-practice governance and recognised globally as a strong and transparent investor. But with only 24 years under its belt, it is still a young organisation. As it nuts out growing pains in processes and technology, the fund has made some recent decisions to change its governance route. 

One of those changes is the appointment of dual decision-makers at the top of the investment team, with Brad Dunstan and Will Goodwin appointed co-chief investment officers in December 2024, which transitioned the fund to a “co-delegation” model defined by collaborative investment decision-making and shared accountability.  

“It’s a little bit in vogue,” Goodwin says in a wide-ranging interview with Top1000funds.com, citing Canada’s OTPP and the Netherlands’ APG, which both have a co-CIO structure.  

For functional reporting lines, Dunstan heads up the public markets, internal active strategies such as strategic tilting, and implementation and rebalancing, while Goodwin’s responsibilities include private markets, external mandates, direct investments, and the data analytics team. 

It is a change initiated by chief executive Jo Townsend, who has been in the role since April 2024, to ensure a diversity of investment opinions on the senior leadership level, rather than a single dominant voice.  

“We do have separate sets of delegations, and there are operations that I don’t need to be across, if he’s doing a large rebalance or some repositioning in the strategic tilting program [for example]. And likewise, he doesn’t need to be aware of what appointed managers are doing,” Goodwin says.  

Where the dual decision-making kicks in is with decisions around new manager appointments or large transactions. Goodwin says that is when both CIOs are involved from the first screen, through the confirmatory due diligence, and the final tick of approval. 

“It’s a model of being aware and being sufficiently involved across the whole portfolio but also keeping the right level of separation of power,” Goodwin says. 

It’s when there is a difference of opinion that the rubber hits the road, and one thing that both CIOs agree on is that when there is a difference of opinion, compromise is not always the best outcome.  

The CIOs are supported by contributions from the investment committee and other senior professionals, but ultimately if they can’t agree, “we do not progress”, Goodwin says.  

“We spend a lot of time communicating what we’re doing and hopefully giving the team confidence. But it’s important that they know as well that they can’t just – I’m not saying they would – curry favour with one of the CIOs and the other one will just have to suck it up,” he says. 

When disagreements arise, it’s all about having a frank conversation with each other, says Dunstan, because “agreeing not to do something is equally a decision as doing something”.  

“You actually have someone there to bounce ideas with… we get some pretty robust discussions, but I feel we get better decisions,” he says. 

Rapid growth 

The fast growth of NZ Super, with assets under management forecast to double every eight to 10 years, means a need to scale up its investment capabilities. However, Dunstan says the fund is not going on a hiring spree to expand its 79-person investment team anytime soon.  

“[We want to] make sure that the team doesn’t necessarily have to grow because the fund grows, so we are setting ourselves up to be more scalable than we have been previously,” he says, adding that the fund already has systematised and automated workflows in many public markets active strategies, from trade execution and settlement to portfolio construction.  

Another challenge that comes with growth is the need to evolve its TPA framework. The fund practices what both CIOs call “one of the purest forms” of TPA, which is defined by an unrelenting focus on total fund outcomes, integrated decision-making, more dynamic portfolio adjustments, and risk factor exposures.  

Being nimble and agile hasn’t been an issue when NZ Super was a small fund, but now it needs to have a more “pragmatic” mindset, Dunstan says.  

“A pure TPA model means that if we don’t like real estate, we’re going to own none of that… You could also have a whole lot of real estate in your portfolio, and if you think real estate is a poor investment going forward, you could sell it all,” he explains.  

“When you’re $200 billion, you can’t really say, I’m going to have $15 billion worth of real estate and no real estate team, and firing and hiring people every five years as markets move around.” 

New alpha 

Goodwin sees the diversification of alpha sources as a priority to evolve the TPA under the co-CIO leadership. Strategic tilting, which has been the fund’s biggest value-add driver over the past decade, will remain a cornerstone. But NZ Super is seeking to strengthen four other active risk pillars: beta implementation, internal credit strategies, real assets, and private equity and other alternatives.  

“If you look over the last couple of decades, a lot of larger funds than us have had strong success in infrastructure. We’ve been relatively underweight infrastructure, that’s fine, it doesn’t suit our portfolio, and we actually haven’t suffered,” he says. 

“But you also have to be aware of if we missed something… so making sure the team is thinking about that and not just resting on our laurels is really important.” 

NZ Super has added 1.57 per cent alpha per annum and returned 9.92 per annum in the past two decades, according to its annual results as at June 30, 2025. Reflecting its focus on the long term, it uniquely reports on a 20-year moving average time frame.  

The fund doesn’t disclose its actual portfolio exposures until its annual report gets published in October, but a spokesperson confirmed the fund had increased its listed equity exposure by 4 per cent since June 30, 2024, with fixed income declining slightly and all other asset classes steady.  

*Excluding strategic tilting positions 

Within strategic tilting, Dunstan says while the model has stayed consistent in the past five or six years, the assumptions that feed into the model, such as different currencies’ risk premia, are constantly reviewed. 

“The model evolves, but not a huge amount of new [long-term valuation] signals go in. It’s more scrutiny of the data and the assumptions around the existing signals… We will review the assumptions every two years,” he says.  

“The program is systematic and we don’t want to be worried about and responding to short-term volatility, because it undermines the whole basis on which the program is built,” Goodwin adds. “We want to harvest the volatility and trade off it, but not seek to change our fair value, unless something material has happened.” 

In preparing for a more complicated investment environment ahead, Dunstan says NZ Super will “prioritise what’s important to us”, including understanding macro factors and weatherproofing its portfolio accordingly, as well as adhering to its sustainability roadmap.  

“[These include understanding] how the world is changing, how we model the world, and these linkages between, say, inflation and interest rates, and do we still believe in those going forward,” he says. 

“Having a really good understanding of how our portfolio reacts in different environments will be important.”