The circumstances of the fraud perpetrated by disgraced financial adviser, Barry Kloogh, were released late last month. The case made for sickening reading. The blatant and egregious abuse of trust seems beyond comprehension. In my column of June 2019, I outlined a checklist of questions that should be asked of ALL financial advisers. The idea of this checklist was to provide investors with a standard against which their current, or a prospective adviser, could be tested. In light of recent events involving Mr Kloogh, I thought it would be valuable to revisit and update that checklist. But firstly, I must emphasise that I am not suggesting these losses were inflicted by anyone other than Mr Kloogh. The fraudster was highly plausible and, in an absence of understanding about the type of safety measures that can exist within an advisory relationship, this fraud was able to occur for an extended period. And this is the root of the problem – there is no single question that can ...

Conventional wisdom says shares are in a bull market once share markets are up at least 20% from the market’s low. (A bear market is typically thought of as a 20% drop from the high.) On 12 March 2020, the S&P 500 in the United States entered a bear market for the first time in 11 years, falling from all-time highs in just a few short weeks amid the global COVID-19 pandemic. Just over five months on and the rally since late March looks like turning into a new bull market as shares look further into the future and anticipate a recovery. In all the Investment Team’s decades of experience, the volatility seen in the first half of 2020 has been unique in its violence and speed. Nonetheless, as we move into what is next on the investment horizon, we identify three factors effecting United States share markets. The ‘Bazooka’ Since its unprecedented intervention in financial markets in March, the United States Federal Reserve (the Fed) has been the driver of financial markets, ...

As winter grinds through its final month, Kiwis might have hoped for a continuation of a COVID-19-free existence. Alert level 4, daily COVID briefings, working from home and queuing at the supermarket a distant memory. It is too soon to predict how severe the recent outbreak will be and its subsequent effect on the economy. Yet data from the first wave shows how important it is for governments to respond quickly. Those countries that did so fastest, including New Zealand, contained the disease most effectively – a lesson the Australian state of Victoria is paying for now. In this Investment Insight, we look at the New Zealand investment regime and where to from here given the themes that played out in March and April look set to reappear. The macro set-up On the afternoon of 12 August, two hours after heightened alert levels came into force, the Reserve Bank of New Zealand (RBNZ) released their quarterly Monetary Policy Statement and update on monetary conditions. The RBNZ ...

When share markets fell -34.0% from their highs in the first quarter of this year NZ Funds mitigated the downside and clients’ growth portfolios were down half as much as the share market. It is easy to forget that we had also positioned clients’ portfolios so that if markets fell further, client portfolios would not have. Since March, NZ Funds has put a huge amount of resource into capturing the share market rebound. At first, we lagged the market - although we reinvested early, the share market recovered faster than expected. However, we aggressively positioned clients’ portfolios across multiple asset classes as the recovery took hold. Year-to-31 July 2020 returns across clients’ growth portfolios are in positive territory with the NZ Funds KiwiSaver Growth Strategy up 0.54%. The average 40-year old KiwiSaver member is now up around 0.62% year-to-date and the average 65-year old KiwiSaver member is estimated to be up 0.77% year-to-date. This compares to New Z...

Do you remember when a six-month term deposit might earn you 8%? I searched back in time to find myself in 2007. That was thirteen years ago. Since then rates have been on a steady decline to arrive at below 2% in May 2020 for a 5-year term deposit at one of the main banks. And yet many investors live with the expectation that low rates are an anomaly and that 8% will return. And yes, during a business cycle interest rates will move higher and lower. But a realistic expectation for higher is now closer to 3% or 4%. Which is why investment markets have the current mantra of “lower for longer”. While we hold on to the expectation of the past reoccurring there is the danger that we ignore the realities of the present. Lower rates can hurt us as investors whether we are accumulating or in retirement. Those accumulating for retirement will want to ensure they are not over-weight to income investments. To be aged 35 and in a conservative or balanced fund has a cost attached to it – t...

There were three key drivers of performance in clients’ growth portfolios for the third quarter. This article discusses NZ Funds’ active management tilts and why we believe they are trends which will continue to benefit long-term investors. 1. Remaining invested As we wrote in 17 July 2020 | Half year review , most see the abysmal forecasts for economic growth and quarterly earnings and believe shares are disconnected from reality — inflated by government or central bank largesse. Yes, there is a disconnect between economic data and share markets but it does not mean markets are irrational. They are doing what they have always done: anticipating future conditions after weighing the worries that headlines and data convey. The market does not wait for the all clear signal in times of hardship, such as COVID-19. In fact, this is likely already priced in to expectations. A sustained share market climb with volatility seems much more likely than another steep downturn ...