If left unchecked, climate change will inflict untold harm on people across the globe, devastate economies, and threaten the viability of countries. The effects of climate change will strain the capacities of governments - even those of the wealthiest countries. According to an article published in Foreign Affairs magazine 1 , “of all the global threats Trump has neglected, mismanaged, or actively inflamed, the climate crisis is the most dangerous and far-reaching". President-Elect Biden appears to understand the gravity of the crisis, appointing former Secretary of State John Kerry as his cabinet-level climate envoy. The United Kingdom, the European Union, and many others have committed to reach net zero greenhouse gas emissions by 2050, and China - the world's largest emitter of carbon dioxide - recently pledged to reach 'carbon neutrality' (absorbing at least as much carbon as the country emits) before 2060. New Zealand is one of the few countries to hav...

Curiosity has led us to adapt our view on global share markets. To be curious implies eagerness to learn and to change. News flow is constantly changing and there are constantly new stories to understand. Three themes reflected in our clients’ growth portfolios are different from our competitors’ vanilla portfolios dominated by New Zealand shares and bonds. In this insight we discuss our high conviction themes and how curiosity and adaptation will generate positive returns. Small cap bounce back While every company may be unique, a company’s total market value - its market capitalisation, or market cap for short - is widely used to create a context for judging that company’s financial performance and business outlook. Small caps, or companies that have an average value of around US$2 billion or less, have disappointed share market investors for quite some time compared to their large cap counterparts. However, that leaves shares of smaller companies plenty o...

It seemed like the news everyone has been waiting for. A vaccine candidate with more than 90% effectiveness against the virus. Perhaps unsurprisingly, this was followed by a heavy rotation in financial markets as investors dumped technology shares and swooped on beaten-up value shares including travel (e.g. Southwest Airlines) and shopping centres (e.g. Simon Property) that could bloom on the vaccine induced rebound. Not so fast… unexpected consequences surface nearly daily and while a vaccine is great news for shares otherwise affected by the virus, the technological advancements and behavioural changes brought about by COVID-19 are likely here to stay. Furthermore, the road to recovery will be anything but smooth and the announcement of a vaccine does not yet mean global herd immunity. At NZ Funds, one way we make sector allocations is via our global investment partners. This includes our partnerships with Suvretta Capital and Emerson Point Capital. Both hedge funds ...

The influence of real interest rates on technology shares This is the second in a series of articles that looks under the hood at what is driving markets and how the patterns that we have seen over recent months and years may be changing. Everyone knows that interest rates are at record lows around the world. What is not as well understood is that real interest rates (interest rates less inflation) have also collapsed. Indeed, the real interest rate in the United States and in New Zealand is now negative and this has important implications for the valuation of other assets. We are taught in school textbooks that an interest rate is the cost that a borrower must pay to gain access to money now rather than wait for their savings to build up over time. With low interest rates the cost is minimal. Putting this another way, low interest rates and especially low real interest rates are very positive for assets which have cashflows well into the future, as the discount required ...

It is hard to believe that it has been four years since Donald Trump was elected President of the United States. This election season has certainly been unique, occurring in a year that has been characterised by a global pandemic, a short but deep recession and continued social unrest. Yet the surprises keep coming. The events of the past few weeks include a new Supreme Court Justice, a combative first presidential debate and President Trump contracting COVID-19 — adding to the uncertainty. We have received an increasing number of questions around how to interpret and follow results from the upcoming election day on 3 November (4 November NZ time). Below, we outline our high-level framework for how events might unfold and more importantly, how clients’ portfolios are positioned. For those who love politics, read on. For those who do not, feel free to skip to our concluding remarks on Portfolio positioning as whoever wins, it does not change our investment approach. After all, w...