The chief executive of New Zealand’s sovereign wealth fund has reportedly warned that the exceptional gains enjoyed by U.S. equities in recent years may not be sustainable, raising the prospect of a period of weaker returns or a market correction.
Jo Townsend, chief executive of the Guardians of New Zealand Superannuation, reportedly made the comments as the NZ Super Fund reported a 14.2% return for the year to the end of June 2026.
Top performance
The fund was valued at NZ$94.4 billion (£44.7bn/$54.4bn) at the end of the financial year and has been ranked the world’s best-performing sovereign wealth fund by Global SWF.
Townsend reportedly said returns from U.S. equities over the past two years had been close to double their annualised 20-year average, suggesting that some “reversion to the mean” should be expected at some point.
Warning!
The warning does not amount to a prediction that Wall Street is about to collapse. Rather, it reflects the fund’s longer-term assessment that investors should not assume the unusually strong returns of recent years will continue indefinitely.
The NZ Super Fund has consequently maintained a diversified investment strategy, rather than chasing the strongest-performing areas of the U.S. market.
Its long-term expected annual return has also been reduced from 7.8% to 7.2%, reflecting lower expectations for future investment returns.
Caution
The comments come as other major institutional investors have also expressed caution. The chief executive of Norway’s enormous sovereign wealth fund has reportedly said investors should not expect the same returns from equities as those seen over the previous six months.
For U.S. investors, the message is therefore less about abandoning equities and more about expectations. After a prolonged period of exceptional gains, even a return to more normal performance could represent a significant change in the market environment.
The key question now is whether U.S. corporate earnings and economic growth can continue to justify elevated valuations — or whether returns eventually move back towards historical norms.