A younger colleague recently asked me what has been the greatest technological development in my working life. Apart from the unsettling realisation that this clearly means I am considered old, I thought it was a fascinating question. After some internal debate about the internet vs the smart phone, I settled on the smart phone. Immediate access to a universe of information, location data and of course global communication, all in the palm of your hand – something straight out of the original series of Star Trek. This question caused me to reflect on the value of immediate access to information – when it is helpful and when it can be unhelpful. With the returns from fixed interest investments currently sitting at 30-year lows, many of the models that drive the design of investment portfolios have been reweighted towards higher risk assets. They now include a higher allocation to more volatile share investments to try and compensate for the lower returns be...

In many parts of the world, people are beginning to return to a more normal life. Schools and restaurants are open, and people can travel freely. The combination of a percentage of population that has had COVID-19 and high vaccination rates means that governments are willing to relax restrictions and begin to re-open their economies. This path to reopening received a boost recently with the announcement of positive trial results for an anti-viral drug from Merck. This drug, Molnupiravir, cuts hospitalisation rates of COVID-19 patients by about half. Importantly, it is also in pill form and is the first oral treatment that has shown promise in treating COVID-19. The other current antiviral, Remdesivir, can only be administered intravenously which makes it difficult for people to access before they are sick enough to be admitted to hospital. Having the option of a pill allows treatment earlier, when the patient is less sick. NZ Funds’ Investment Team have been c...

Over the last few years the conversations around KiwiSaver have been dominated by modest returns and the benefits of low fees. Recently, there has been much discussion about the $1.2 billion that investors switched from growth to income funds during the recent COVID-19-driven sell off. However, there has been little discussion of behavioural economics, which identifies that investors often feel compelled to switch at low points in the cycle. Or of the solution, which is access to high quality, affordable, financial advice. Internationally there continues to be a steady stream of academic research quantifying the benefits of working with a financial adviser over an investment lifetime. One study showed that individuals and families who were fortunate enough to work with an adviser accumulated more than twice as much as those who invested on their own. The year ending 31 March 2021 was a seminal one for NZ Funds. Our investment approach, which continues to b...

NZ Funds was one of the first in New Zealand to provide access to globally diversified portfolios. These investments were managed in partnership with world renowned investment organisations like Capital International in Los Angeles, Sanford Bernstein in New York and Wellington Asset Management in Boston. To gain a globally diversified exposure to different asset classes, NZ Funds continues to use a combination of internally and externally managed strategies. NZ Funds manages assets in-house where we believe we have an advantage in doing so, and partners with global managers to invest the remainder of clients’ capital. When we look for global diversity, a unique advantage we have is our ability to identify and access top performing global managers. We have over two decades of research on managers across numerous asset classes and geographies. This gives us a rich dataset from which we can select managers that we believe will give our clients the strongest ...

In the first Investment Insight of each month, we will look back at the key themes and trends for the previous month, and forward, setting out our views on what will affect client performance in the months to come. An historical quirk? The September effect refers to historically weak share market returns for the month of September. As with many other calendar effects, the September effect is considered a historical quirk in the data rather than any causal relationship. Nonetheless, it has lived up to its name in 2021 with volatility abundant during the month and the New Zealand share market ending the month up just 0.75% while United States and global share markets down -4.65% and -3.58% respectively. The decidedly downbeat month for share markets appeared to be due to several factors. Primary among them were fears that a possible default by Evergrande – China’s second-largest (and the world’s most heavily indebted) property developer – might set off a global fin...

The Inflation Category fulfills an important role in the investment solutions that NZ Funds offers to clients. At their heart, Inflation Category portfolios are, as the name suggests, looking to achieve a return that grows clients’ capital at the rate of inflation or better. Given this goal, a mix of asset classes are required. An allocation to growth assets such as shares is needed to generate returns that can be expected to be consistently ahead of inflation. However, these portfolios are not intended to experience the ups and downs that pure growth portfolios, such as those which invest fully in shares, do. As a result, a percentage of Inflation Category portfolios have been invested in less volatile income assets such as bonds. Bonds are more stable investments, but the trade-off is that they offer a lower rate of return than shares. Given the goal of beating inflation, income assets utilised in Inflation Category portfolios have targeted bonds that genera...

The recent events at Lynnmall shopping centre in West Auckland provided a stark reminder of the risks of developing a mindset which is intolerant of other points of view. Although this was an extreme example, even in our day-to-day lives, we are all too prone to revert to our own established thinking and not willing to consider other points of view. Perhaps factionalism comes pre-packed as part of the 'human condition'. My observation is that, if we succumb to this way of thinking, we limit ourselves and our opportunities. When it comes to financial advice, there are common themes that most advisers will agree on: diversifying your capital across different asset classes and geographies, investing in accordance with your risk profile, time frame, and being mindful of tax efficiency are examples. However, the area where factionalism tends to 'rear its head' is the question of active management vs passive management. The difference between these two styles 1 can be ...