It returned 1.89% after costs and before tax, compared to 14.64% for the same period a year earlier.

The fund out-performed its passive Reference Portfolio benchmark by 0.52% ($155 million) during the year, due mainly to strong performance by active investments in timber and infrastructure.

Its single largest investment, a 42% stake in New Zealand forestry business Kaingaroa Timberlands, increased in value by $82 million to $1.49 billion.

The fund, which is designed to help pre-fund national superannuation payments from 2032, finished the June financial year at $30.10 billion before tax, up $0.56 billion.

Chair Catherine Savage said the result was robust given the low growth, volatile environment. Global equity markets experienced negative returns over the year, with the MSCI developed markets and emerging markets indices returning a combined -1.88%.

Savage said the Guardians’ board remained focused on the long-term and therefore deliberately weighted the fund towards growth assets, such as global and New Zealand shares and private investments in businesses, including early stage companies.

“While these assets can lead to short-term volatility in returns, our emphasis on growth is appropriate given the fund’s long time horizon and ability to diversify. Not every investment will be successful, and the fund’s returns will dip from time to time, but investing in growth assets is the best way to ensure that we maximise long-term returns to the taxpayer,” she said.

Chief executive Adrian Orr said notwithstanding strong recent fund returns in July (3.7%) and August (1.2%) 2016, the global investment environment was challenging, with slow economic growth. “Overall investment returns are likely to be volatile and on a low trajectory for some time.

“Global growth and inflation remain subdued, despite Central Bank actions and historically low interest rates. There is an abundance of capital looking for investment opportunities, and asset valuations are therefore fully priced. We are having to work harder to find attractive investment opportunities."