2020 is now behind us and most of us breathed a collective sigh of relief. Thankfully our worst fears about the health impact of COVID-19 on our country have not come to pass and to date the economic impact on most households has been muted. From an investment perspective, 2020 was a very strong year with growth focused investment strategies posting double-digit after-tax returns. This was a far cry from many predictions that were made at the start of the global pandemic. However, this does beg the question, could 2021 be the ‘hangover’ year; the year in which the economic stresses that were anticipated in 2020 finally have an impact? In last month’s column I commented on the many doom merchants whose ‘expert’ predictions in such areas as housing were proved to be completely wrong; so I am certainly not going to be advocating becoming overly pessimistic at this point. However, it is worth asking the question, are there specific actions that I should be taking with my in...

Bitcoin is a digital (electronic) currency. It’s stored on-line and used to settle transactions. Where we once used dollars and cents, we can use Bitcoin. More often it is known as a cryptocurrency. Of which there are many – it just happens that Bitcoin was the first to be created, in 2009, and therefore has become the best known. Others include Ethereum, Ripple and Litecoin. If Bitcoin has been in conversation in recent years, likely the focus has been on the opportunity to make money, but that it is speculative at best. There is now increasing discussion of Bitcoin as a serious investment option, over and above its core task of settling transactions. Particularly now there has been a drop in fraud concerns and increased safety in on-line storage options. It is even possible to buy insurance against Bitcoin theft and hacking. Gold meanwhile has been regarded as a store of value for centuries. Currencies, countries and investments have periodically collapsed but gold...

As 2020 draws to a close I thought it would be helpful to reflect on the year that was, and what specific financial lessons COVID-19 has taught us. I had hoped to create a clever acronym with the headings, but this proved to be well beyond my literary skills so, true to type, I have resorted to numbers. 1. Family. It is interesting to note that when confronted with an existential threat like COVID-19, our core values tend to be revealed. For many people those prized things were family and relationships. The simple truth is that these things don’t have to cost a lot. For those of us who stayed employed during the lockdown (and that was most of us) we generally saved money. Some of these savings related to reduced commuting costs but much resulted from less frivolous spending. One question to ask yourself is: have any of these improved spending behaviours been embedded in your ongoing savings habits? 2. Beware of alarmist experts. Conventional wisdom does ...

On 27 March New Zealand was two days into a four-week nationwide lockdown, China had closed its borders to all foreigners and the United States had recorded the highest number of COVID-19 cases globally while approving an historic US$2 trillion of spending in response. In our 27 March 2020 | Market Update Four we wrote that “there is no better time to buy shares.” Share markets were priced at levels not seen since the Global Financial Crisis. Given low interest rates coupled with economic stimulus, we expected a three- to four-fold gain in shares over the next five years, just as we saw post-February 2009 and following the 2000-2002 tech crash. Given the health consequences suffered by millions of people around the globe and the economic burdens faced by people and businesses, it was to some unthinkable that financial markets would now be trading at record highs. This highlights the relentless forward-looking nature of markets. It is not just the sharp drawdo...

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 ...