Riding out market volatility: How ASB builds resilient portfolios

If you've noticed a dip in your KiwiSaver or Investment Funds balance recently, you're not alone. Market volatility can feel unsettling, but investing with emotions can be costly. Making reactive changes to your investment strategy could lock in losses and put your long-term goals at risk. 

In a recent episode of the ASB Investment Podcast, ASB's Nigel Grant (Head of Wealth Product) sat down with John Smith (Head of Asset Management, ASB) and David Griffith (Head of Multi-Asset Solutions, BlackRock) to explain how ASB portfolios are structured to weather volatility with a disciplined, long-term approach to deliver strong investment outcomes for investors. Listen to the full episode on Spotify or Apple Podcasts. 

ASB's investment portfolios - the ASB KiwiSaver Scheme, ASB Investment Funds, and ASB Portfolio Series - are built in partnership with some of the world's leading investment managers. Each fund is carefully constructed to balance risk and return across a diversified mix of asset classes. Compare ASB KiwiSaver Scheme funds. 

As investment partner for ASB, BlackRock is responsible for deciding how investor funds are allocated between various underlying fund managers, by drawing on their global research, scale and expertise. The goal: to outperform long-term benchmarks and deliver strong, consistent returns to customers. 

Every year, BlackRock undertakes a Strategic Asset Allocation (SAA) review process to ensure that portfolios remain diversified, forward-looking, and resilient in the face of changing market conditions. They assess expectations for the year ahead and decide how to allocate investor funds across asset classes, factoring in things like duration, diversification, and inflation protection.

That process is already underway for 2025. It's driven by hard economic data, not headlines or sentiment, so portfolios are positioned carefully, not reactively, and stay aligned with their long-term objectives, even as markets shift.

Not all markets or asset classes move in the same direction all the time. For example, equities and bonds tend to be negatively correlated, often moving in different directions, providing a natural hedge during market volatility. Diversifying across asset classes can help cushion against shocks in any one area. 

While all assets tend to move in tandem on the most volatile days, diversification helps ASB portfolios stay resilient through downturns and through to the eventual recovery. 

As Nigel Grant put it:

"[The majority of portfolios] are heavily diversified. So don't conflate what is coming out of the US, and in the charts you might be seeing, or what the media are talking about as representative of what's going around in all other asset classes… That's why you diversify." 

The SAA process helped position ASB portfolios well in 2024, delivering strong returns for investors and earning recognition as a KiwiSaver Fund Manager of the Year nominee. 

John Smith shared: 

"We're top quartile relative to most of the peers in the marketplace on a one-to-three-year basis*, and BlackRock have outperformed the benchmark by 1%, which is quite a lot. It makes a difference if you're continuously adding that sort of value over the long run. It really makes a difference to our customers."

Key drivers of 2024 performance included:

• Pro-growth stance: Portfolios were modestly overweight to growth assets during a strong first half for equities. 
• Global and emerging market focus: These outperformed Australasian equities, with global equities up 27% and emerging market equities up 21%, compared to Australasian equities up 12%. Over 2024 we also diversified the core ASB funds away from larger US companies, introducing an exposure to global infrastructure securities^.  
• Gold as a Diversifier: Gold was one of the strongest-performing assets, up over 42% in unhedged New Zealand dollar terms. Despite a small portfolio weight, it significantly contributed to overall returns.
• Unhedged Currency Exposure: As the NZD fell more than 11%, foreign currency exposure in global equities proved beneficial.

2025 brings new challenges and opportunities. Markets continue to be shaped by economic shifts and geopolitical uncertainty, but short-term corrections shouldn't cloud long-term strategy.

"We need to be disciplined and thoughtful around the recent headlines," said David Griffith. "We have a process to follow that has worked historically, and we have a lot of confidence in that."

John Smith offered some historical perspective:

"I can remember the first correction that I ever experienced was back in 1987… and the markets came down 20% in one day. But that year, they still ended up for the year, higher than when they started. And that sort of repeats itself regularly through the last 30, 40 years that I can recall… So I just look through the volatility and look forward."

We know that market volatility can be especially unsettling for those approaching retirement. But once you're in the right fund for your goals, investment timeframe, and risk tolerance, staying there, if you can, tends to be the best approach. History shows that markets recover over time, and downturns can actually be a good time to buy units at lower prices if you're continuing to invest regularly. 

To stay up to date with our latest market commentary, visit the ASB Investor Hub.

*As at 31 December 2024.

^Performance measured using the following:

• MSCI World ex Australia Climate Paris Aligned 50% Hedged to NZD Index (Global Equities)
• MSCI Emerging Markets Index (Emerging Markets)
• 70% S&P/NZX 50 Gross Index with Imputation and 30% S&P / ASX 200 Accumulation Index (Australasian Equities)

This material provides general information only. This material is not a financial product recommendation or an offer or solicitation with respect to the purchase or sale of any financial product in any jurisdiction.

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 https://www.disclose-register.companiesoffice.govt.nz (search for ASB). ASB Portfolio Series is a discretionary investment management service provided by ASB Bank Limited. For more information see the ASB Portfolio Series Service Disclosure Statement available upon request from ASB, your Wealth Manager or your Wealth Associate.

This material has been created with the co-operation of BlackRock Investment Management (Australia) Limited (BIMAL) ABN 13 006 165 975, AFSL 230 523 on 17/03/2025. Comments made by BIMAL employees here represent BIMAL's views only. This material provides general information only and does not take into account your individual objectives, financial situation, needs or circumstances. Before making any investment decision, you should obtain financial advice tailored to you having regard to your individual objectives, financial situation, needs and circumstances. Refer to BIMAL's Financial Services Guide on its website for more information. This material is not a financial product recommendation or an offer or solicitation with respect to the purchase or sale of any financial product in any jurisdiction.