What do the recent global banking developments mean for your investments?

24 March 2023 / Published in Your Money

International markets are currently going through a period of increased volatility, and you might be seeing headlines surrounding issues for some US and European banks. 

What volatility typically means for things like your investment in the ASB KiwiSaver Scheme - or other investment products you may have, like investment funds and shares – is that day-to-day balances and values can move around more than usual. Generally during periods like this, we tend to notice market movements down rather than up.

What's happening in global banking?

Stress in the banking sector has seen the closure of Silicon Valley Bank (SVB) and Signature Bank in the US, and European investment bank Credit Suisse has been under financial stress and has been bought by UBS. Banks are borrowers (of people’s deposits) and like all borrowers, managing interest rate risk, particularly when rates are rising rapidly, is important.

You can keep up to date with our regular economic reports.

What about New Zealand banks?

Information about the stability of all New Zealand banks is publicly available on the RBNZ’s Bank Financial Strength Dashboard

What does this mean for your investments with ASB?

It’s important to understand that all investments involve some degree of risk, and investing in a managed fund, such as the ASB KiwiSaver Scheme and ASB Investment Funds, is no different. ASB KiwiSaver Scheme and ASB Investment Funds are held separate to ASB Bank Ltd, in trust by the custodian. Investments in the Schemes are not deposits or liabilities of ASB Bank Limited. 

For our core diversified funds in the ASB KiwiSaver Scheme and ASB Investment Funds, we have an index tracking investment management style for global shares and global fixed interest assets. Index tracking investment management aims to deliver returns that closely track those of a market index (or a combination of market indices). This means that we invest in all, or a representative sample of, companies listed on the benchmark index we track. The benchmark index usually contains thousands of companies for that type of asset. SVB, Signature Bank and Credit Suisse, are part of the indices we track, and in this instance, you hold a very small allocation to them.

For example, if you had $30,000 invested in the ASB KiwiSaver Scheme Growth Fund at 28th of February 2023, approximately $9 would be invested in the three banks mentioned above.

Our experts think there is likely to be more volatility (ups and downs) in your investment balance over the near term as governments and regulatory authorities complete the necessary steps to maintain confidence in the system. 

Volatility is part of investing in products such as a KiwiSaver scheme or managed investment fund. Our asset management team and underlying fund managers continue to manage your investments and adjust to the changing market environment while maintaining a medium to long-term horizon. As an individual investor, the best plan remains the same - sit tight, don’t check your balance every day, and keep to your goal or strategy.

From time to time your goals, circumstances, and attitude to risk may change. If this is the case, or it’s been a while since you last checked in, then periods like this are another reason to get some guidance or advice. That advice can be talking to a specialist or using any of our helpful online tools.

How often do market shocks happen?

Events that impact global markets like this happen more regularly than you’d think. Look at this chart and all the events that have rattled the S&P 500 over the past 100 years or so. The S&P 500 is made up of 500 of the largest US companies, and is often used as a barometer to indicate the strength of the US economy, but regardless of the dips (some of which are large), the sharemarket has still shown strong recovery over time.

Graph taken from our volatility blog published in February 2022. Data Source: Returns Web

We’re here if you need support

If you'd like to discuss your investment in the ASB KiwiSaver Scheme or ASB Investment Funds, remember you can always contact the ASB Wealth team. For the ASB KiwiSaver Scheme, call 0800 272 738, or for ASB Investment Funds call 0800 108 084. You can also request a call back.

For online support on how to get advice and our digital tools visit our KiwiSaver advice page. To Stay up to date with market commentary, value-packed insights and the latest news impacting your investment visit our KiwiSaver Investor Hub.

Our team is happy to help, and their advice is totally free of charge.

Interests in the ASB KiwiSaver Scheme and ASB Investment Funds (Schemes) are issued by ASB Group Investments Limited, a wholly owned subsidiary of ASB Bank Limited (ASB). ASB provides administration and distribution services for the Schemes. No person guarantees interests in the Schemes. Interests in the Schemes are not deposits or other liabilities of ASB. They are subject to investment risk, including possible loss of income and principal invested. For more information see the ASB KiwiSaver Scheme Product Disclosure Statement or the ASB Investment Funds 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).


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