A challenging start to the investment year - what changes have we made?

It has been a volatile start to the year for world markets, which in turn has affected investments across the industry. After relatively positive performance for almost two years since the onset of the pandemic, many investors will be experiencing something they haven't seen in quite some time - an extended period of fluctuations in the value of their investment.

Increased volatility has been happening since the end of 2021. Driving this had been initial fears of rising inflation which have now been confirmed, interest rates rising across the world to help combat this inflation, and in the past few weeks the Ukraine-Russia crisis.  

As a result, some investors have been experiencing larger movements in their investment balances, than they might be used to. 

At ASB, a core part of what we do is regularly review how our investments are performing, assess where we think the opportunities and risks are likely to be, look forward, and then consider if any changes need to be made.

This is part of the key decisions that ASB partner with BlackRock* on. Together we focus on the most important things we believe influence your returns: asset allocation (the percentage of each asset in your fund) and currency decisions.

Out of this, ASB investors will see the following changes across the portfolio of their relevant ASB KiwiSaver Scheme, and ASB Investment Funds:

• A slight reduction in equity assets (shares) overall - a move to a more 'neutral stance' across the relevant funds**.
• Within equities, a reduced exposure to Australasian equities and a relative increase in exposure to international equities including:

•    Reduced exposure to global investment grade credit (international fixed interest); and

•    Modest increase in foreign currency exposure.

• Lastly, the inclusion of new asset classes - inflation linked bonds (New Zealand and international fixed interest), and gold (commodities). 

These changes are designed to deliver improved investment outcomes, while at the same time reducing the risk taken to achieve these returns by:

• Reducing exposure to equity assets while we navigate what both ASB and BlackRock see as an increasingly uncertain investment outlook for 2022.
  
• Providing more diversification with the introduction of new asset classes. We have recently added gold to our asset allocation. BlackRock's analysis shows gold can replace the defensive characteristics of sovereign (or government) bonds in the portfolio while real bond yields remain supressed, in this cycle versus previous cycles. See a full breakdown of where we invest and what sector and industry the companies we invest in belong to here. 

ASB will continue to work with BlackRock to monitor performance across all our investments and help our customers navigate what could be a challenging year ahead for investing.

As always, you can get advice from our team of KiwiSaver Specialists by calling 0800 272 738 – they're available from 8am to 6:30pm during the week, or 8:30am to 5pm on Saturdays. Otherwise, have a listen to a couple of our recent ASB Investment Podcast episodes:

• Episode 43: The power of advice - why advice is important, and the impact it can have on your goals.
• Episode 44: Market update with BlackRock's Ben Powell - the very latest on the wider outlook for markets, and an update on the Ukraine-Russia crisis.

*BlackRock Investment Management (Australia) Limited (BlackRock) is a wholly owned subsidiary of BlackRock, Inc. BlackRock, Inc is based in the US and is a leading global provider of investment management services with over US$10 trillion in assets under management as at 31 December 2021.

**The Cash Fund and Positive Impact Fund will not have these changes applied as they did not hold any of these assets.

**Based on the BlackRock definition and categorisation of Growth and Defensive Assets;

Interests in the ASB KiwiSaver Scheme (Scheme) are issued by ASB Group Investments Limited, a wholly owned subsidiary of ASB Bank Limited (ASB). ASB provides Scheme administration and distribution services. No person guarantees interests in the Scheme. Interests in the Scheme are not deposits or other liabilities of ASB. They are subject to investment risk, including possible loss of income and principal invested. Fees may change. For more information see the ASB KiwiSaver Scheme Product Disclosure Statement available from this website and the register of offers of financial products at www.disclose-register.companiesoffice.govt.nz (search for ASB KiwiSaver Scheme).