Unfortunately, the debate around the cessation of payments has caused some recurrent fallacies about financial investment to, uh, recur. Unsurprisingly this is most common at the moment among those who support the parties in opposition, but I suspect that the same fallacies are broadly shared irrespective of political affiliation.
The first is that it is possible to consistently 'beat the market'. Share prices, we are told, are really low at the moment, and so if we buy them all now (or the Super Fund buys them on our behalf), when they go back up again we will all be rich. It would be fabulous if it were as simple as buying low, selling high. It supports our basic intuitions about trends - things usually carry on in the same direction if they have been doing so for a long time. Population increases, economic growth increases, so on. But this intuition fails us when it comes to financial markets.
To find out why, we have to turn to the Efficient-Market Hypothesis, in its weak-form incarnation (which is the most empirically supported one). As any financial prospectus will (or at least, should) tell you, past returns are no guarantee of future performance. It is impossible to predict what is going to happen in the market because if it were, people would. For example, if prices were going to rise at some point in the future and this was predictable, demand would increase. But then prices would rise already! What this means is that it is impossible to systematically make economic profit (or above market profit) from any given investment strategy, except by luck. For the most part share prices are like an old man at the supermarket, they follow an unpredictable, random walk.
This obviously precludes a lot of talk about how the NZ Super Fund managers are skilled, unskilled, or whatever. Kenneth French gives a good example of how it is easy to mistake luck for skill:
Consider, for example, a hedge fund with an annual volatility of 20%. (To be more precise, the standard deviation of the fund's excess return with respect to the appropriate benchmark is 20%.) If the fund's average abnormal return is 5% per year over a ten-year period, many investors and financial reporters would conclude that the manager is truly gifted, with a real knack for identifying under- and over-valued securities. But they would probably be wrong. Suppose the manager's true alpha is zero, so he really has no skill beyond that needed to recover his costs. If we pretend his returns are normally distributed, the probability that his average abnormal return exceeds 5% per year for a ten year period is more than 20%. In other words, in a group of hedge fund managers with standard deviations of 20%, we expect one in five to have a ten-year average annual abnormal return of at least 5%—even if none actually have any skill. We expect one in twenty of the unskilled managers to produce a ten-year average annual abnormal return of at least 10%.French and Eugene Fama (the 'inventor' of the EMH) have an interesting paper on this here.
The second argument for why we need a super fund is that somehow it can make more money simply by virtue of being large. I cannot, to be honest, see how this could be true. But even if it were, the New Zealand Super Fund is hardly a massive player on the global stage. China, for example, has a fund (used for different purposes) of over $1t. If there were advantages to be made from having more money, other people would be getting them first. Some economies of scale are non-rival, it's true. But it seems unlikely that the NZ Super fund will somehow be able to buy stocks at below-market rates just because it has lots of capital.
As I've said before, the real test of someone's conviction that there is a lot of money to be made on the financial markets is their own financial position. If beating the market is so easy, do it yourself.