Last month, we questioned why the New Zealand regulatory environment ‘gifts’ billions of dollars of Kiwi savings to only nine of New Zealand’s 23 KiwiSaver managers, when all managers must demonstrate they are worthy of managing the public funds. We showed that few of the default managers selected had New Zealand-owned parent companies. Additionally, few of the managers selected specialised exclusively in funds management. And finally, we questioned whether, with hindsight, the managers which were chosen had proven to be more stable and more compliant than the other managers in the market. This month we examine what happens to the clients who are allocated to nine of New Zealand’s 23 KiwiSaver managers, and ask again whether awarding a selective group of managers monopoly default status is really in New Zealanders’ long-term interests? Under the current KiwiSaver rules whenever a new employee joins an employer, they are automatically enrolled in KiwiSaver unless they are alrea...

While the economy is suffering from the crippling impact of the coronavirus, technology companies are holding steady — even thriving. Global lockdowns have accelerated the adoption of new technologies, boosting e-commerce, remote working, and other innovations. In fact, the largest technology companies could emerge stronger as economies open up from the COVID-19 enforced lockdown. Uncertainty remains, both about the duration of the pandemic and the severity of the recession. However, the long-term secular trends that were around prior to the pandemic are accelerating. One of the most striking quotes has been from Microsoft Chief Executive Satya Nadella who said recently, “We’ve seen two years’ worth of digital transformation in two months”. Emerson Point, one of NZ Funds’ New York based global investment managers, put together a sample of some of the trends that are accelerating: • Cloud computing. • ‘Big data’ analytic tools. • e-commerce and the decli...

New Zealand is easing back to (a new) normal as almost two months of strict lockdown comes to an end. Lockdown restrictions were among the strictest in the world meaning the economy is badly affected. However, the measures appear to have worked. So too will NZ Funds’ weekly communications normalise. Now known as NZ Funds’ Investment Insights , we will share with you a variety of perspectives on financial markets, financial advice and developments at NZ Funds. New Zealand’s economic setup New Zealand was fortunate to have a strong economy and fiscal position coming into this current crisis. It is this, together with the success in which New Zealand has so far been able to combat the health effects of the virus, that we remain positive on New Zealand shares. We have increased clients’ exposure to New Zealand as we progressed through lockdown. Prior to the COVID-19 pandemic, New Zealand’s real GDP growth in the year to December 2019 was higher than many of our intern...

A few months ago I met with a friend who is a successful accountant and business adviser. We were talking about the business environment and the matters that he was raising with his farming clients. He recommended a TED talk by Margaret Heffernan called ‘The human skills we need in an unpredictable world’ which she gave in August 2019. 1 As part of the presentation she questioned the ‘just in time’ management mantra that advocates an intense focus on efficiency in our supply chains and business thinking. She made the observation that ‘just in time thinking’ may help economic efficiency, but with it comes great vulnerability. Heffernan was advocating a more nuanced approach where businesses integrate some ‘just in case’ thinking to their business models. This may result in the loss of some business efficiency but with a significant increase in business resilience. I thought that the topic was interesting at the time, but the truth ...

Global share markets have stabilised at levels well above their March 2020 lows. This is due to the extraordinary intervention from governments and centrals banks across the globe. As we discussed in 27 March 2020 | COVID-19 Market update 4 , the New Zealand Government announced its largest ever stimulus package. In the United States, the Senate approved a bazooka – the largest economic stimulus package in modern history. We believe markets will now trade in a range of plus or minus 15% for the remainder of the year. Do not expect a strong rally or a sharp sell off in financial markets. Do expect a large increase in economic stimulus as countries announce further business support and infrastructure spending. Although markets may be range bound in the short-term, in the medium- to long-term we remain positive that share markets will push higher. Because of the size and power of the government stimulus, it tips the scales in favour of financial assets, even if it takes time for th...

NZ Funds recently launched a free COVID-19 KiwiSaver hotline supported by independent advisers throughout the country. The phone line is open to clients of any KiwiSaver provider and promises no sales or products, just generic KiwiSaver advice. Since its launch, the phone line has been inundated with calls from anxious investors whose savings are with large state appointed default managers (whether or not their savings are in default funds). This raises the question: how did New Zealand end up with so many KiwiSaver members ‘owned’ by so few managers; and is that model consistent with good customer outcomes? One of the features of KiwiSaver, that helped get it across the line in Parliament, was that it would not be compulsory. The compromise was, and still is, that new employees are invested by default and need to opt out. While a compulsory savings regime – like most of the Western world has – would have put New Zealand in a better position today, the opt out scheme was nonetheles...

NZ Funds’ active management approach means clients’ growth portfolios have performed better than the share market. We have achieved this in two ways. Firstly, we have mitigated the downside. This means client portfolios fell less than the market selloff. Second, we have fully participated in the market rebound capturing more returns than the market as it bounced back. It is now half-time for global share markets. Markets are halfway between the high set prior to the onset of COVID-19 and the low of March 2020 when the reality of the pandemic took hold, but governments were yet to respond. As in sport, half-time gives the market time to digest what has just happened. In this case, what are the health and economic impacts of COVID-19? The economic recovery will take time. Countries, such as Italy which had little time to respond, are reeling from the medical and now economic horrors of the virus. They will react differently from countries such as New Zealand and Australia, which hav...

In the interests of helping maintain sanity in your bubble, I had initially planned to make this month’s column a 'COVID-19 free Zone'. After the Christchurch earthquakes, turning off the endless TV news was sometimes the healthy option. I think there is a good argument for applying the same approach to the 'wall to wall' COVID-19 coverage. However, a column dedicated to financial management could be accused of negligence by not addressing the current matters at hand. When we face events like this, for which we have no precedent within our lives, it is very easy to feel overwhelmed. The universe of possible outcomes seems so vast. At times like this we need to remember to base our decision making on fact not fiction and keep our emotions in check. I don’t want to callously disregard the human toll of these events, but let’s start with a few facts: 1. We know what has caused this event and it seems highly likely that we will be able to develop an effective vacci...