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ASB KiwiSaver Scheme Investment Review

Investment review for the ASB KiwiSaver Scheme for the quarter to 30 June 2016.

What happened in investment markets?

  • Brexit was the word on everyone’s lips during the quarter as the UK’s decision to exit the EU took markets by surprise and lead to significant volatility.
  • Over the quarter, the best performing fund was the Growth Fund with a return to investors after tax and fees (excluding the administration fee) of 1.41%. This was followed by the Balanced Fund with a return of 1.38%.
  • Listed Property continued its strong run and was the best performing asset class over the June quarter with the FTSE EPRA/NAREIT Developed Rental Index (100% hedged to NZD) up 4.04% over the period. This was followed by Australasian Equities with the combined 67% S&P/NZX50 and 33% S&P/ASX200 Index (100% hedged to NZD) returning 3.11%.
  • Currency hedging was an important factor for returns over the period with NZD strengthening against most of the major currencies including the AUD, USD, EUR and lifting more than 10% on the GBP.

How did your fund perform this quarter?

 

NZ Cash Fund

Fund objective: To provide exposure to a portfolio of investment grade short term deposits and fixed interest investments with New Zealand registered banks, with a negative return expected less than one in every 50 years.

  • The NZ Cash Fund return to investors after tax and fees (excluding the administration fee) was 0.43% for the June quarter, and 2.04% over the past 12 months.
  • The Official Cash Rate (OCR) remained at 2.25% as the Reserve Bank of New Zealand (RBNZ) declined the opportunity for further cuts at both the April and June meetings. The June decision was a particularly close call with the economists and market participants split in the run up to the decision.
  • A hot New Zealand housing market and a persistently strong dollar continue to put the RBNZ in a difficult position as they consider the implications of leaving the OCR or making further cuts.


Conservative Fund

Fund objective: To provide modest total returns with a negative return expected less than one in every 25 years.

  • The Conservative Fund return to investors after tax and fees (excluding the administration fee) was 1.14% for the June quarter, while the return for the past 12 months was 3.82%.
  • The Conservative Fund benefited from having a large allocation to both the NZ and International Fixed Interest asset classes, with the respective market indexes returning 1.74% and 2.20% over the quarter.
  • Both the NZ and International Fixed Interest sectors benefited from declining yields over the quarter. The rush to safety by many investors and continued potential for further stimulus by central banks both applied downward pressure on yields, boosting the performance of the fixed interest sectors.

View the quarterly fund update for more information on Conservative Fund reporting here.

View the returns to investors since the inception of the Conservative Fund here.

Are you in the right fund? Complete our short investor profile questionnaire to find out what type of investor you are and the fund or funds that may suit you.

Moderate Fund

Fund objective: To provide moderate total returns with a negative return expected less than one in every seven years.

  • The Moderate Fund return to investors after tax and fees (excluding the administration fee) was 1.34% for the June quarter, while the return for the past 12 months was 4.23%.
  • The largest positive contribution to the Fund’s quarterly performance came from the 25% allocation to International Fixed Interest although all other asset classes contributed significantly.
  • It was a strong quarter for International Fixed Interest as continued speculation over additional monetary policy easing and strong demand for “safe haven” assets following the UK’s decision to exit the EU pushed yields lower and supported higher bond prices.

View the quarterly fund update for more information on Moderate Fund reporting here.

View the returns to investors since the inception of the Moderate Fund here.


Balanced Fund

Fund objective: To provide moderate to high total returns with a negative return expected less than one in every five years.

  • The Balanced Fund return to investors after tax and fees (excluding the administration fee) was 1.38% for the June quarter, while the return for the past 12 months was 3.29%.
  • The 33% allocation to International Equities provided the Balanced Fund with the largest positive returns over the quarter closely followed by the 20% allocation to Australasian Equities.
  • International equity markets started the quarter strongly, encouraged by the rebounding price of several commodities and although some of these early gains were reversed following the shock Brexit decision, most major equity markets had positive returns over the period.

View the quarterly fund update for more information on Balanced Fund reporting here.

View the returns to investors since the inception of the Balanced Fund here.


Growth Fund

Fund objective: To provide high total returns with a negative return expected less than one in every four years.

  • The Growth Fund return to investors after tax and fees (excluding the administration fee) was 1.41% for the June quarter, while the return for the past 12 months was 2.59%
  • The 45% allocation to International Equities provided the largest positive contribution to the fund over the quarter with the allocation to Australasian Equities providing the largest contribution over the past 12 months.
  • Although it was a somewhat quieter quarter for Australasian Equities, the asset class has been the star performer over the past 12 months, particularly supported by the allocation to NZ equities where the S&P/NZX50 (with imputation credits) has lifted more than 20%.

View the quarterly fund update for more information on Growth Fund reporting here.

View the returns to investors since the inception of the Growth Fund here.

Investment markets outlook

Considerable uncertainty remains regarding the global economy, with little additional clarity provided over the last quarter. Indeed, the surprise decision of the UK to exit the EU has added to the cloudy outlook. At the end of the quarter the UK had not triggered the formal exit mechanism and there is no set time for that to occur in. It now appears likely that the new Prime Minister will not start the formal exit process until 2017 so it is likely that the form of the new relationship between the UK and EU will continue to be unknown for some time yet.

Domestically, low inflation looks set to remain in place for some time, with the RBNZ not predicting a return to the 2% target until December 2017 and many banks/institutions forecasting for it to take much longer. The low global inflation environment should act to keep both NZ and global interest rates low for some time to come.

Returns to investors

Returns are a reflection of past performance and are not a guarantee or indication of future performance because returns fluctuate (move up and down). Returns can be negative and you may receive back less than the total amount of your contributions. In relation to the returns reported in this investment review:

  1. The returns are calculated on the change in unit price of the units in each fund for the period, adjusted for tax credits and are the returns on funds invested at the beginning of the period, with no subsequent contributions or withdrawals. Returns for periods greater than one year are annualised. Returns for periods less than one year are not annualised.
  2. Since 7 September 2012, the cash portion of each fund has been managed using an active investment management style. The returns in previous periods reflect an index tracking investment management style for cash.
  3. Prior to 1 April 2011, the management fee was calculated and incorporated into the unit price daily, and deducted from the relevant fund monthly. From 1 April 2011, the Management Fee has not been incorporated into the unit price or deducted from the fund, but deducted from members' accounts monthly. In order to display returns pre and post 1 April 2011 on a comparable basis, the management fee has been factored back in to the returns for the periods from 1 April 2011.
  4. The above returns reflect the market indices and asset allocations that applied during the relevant return period. These may differ from the current market indices and asset allocations.
  5. Tax has been included in the calculation of returns by applying the highest PIR during the relevant period. The returns are calculated on the assumption that all foreign tax credits may be fully utilised by the investor.
  6. For further information on the funds shown above please consult the ASB KiwiSaver Scheme Product Disclosure Statement, the register of offers of financial products at www.business.govt.nz/disclose (search for ASB KiwiSaver Scheme) or your ASB Wealth Manager. ASB Wealth Managers can provide you with copies of their disclosure statements on request and free of charge.

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. 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.business.govt.nz/disclose (search for ASB KiwiSaver Scheme).

The investment market commentary in this investment review is based on information obtained from sources believed to be reliable and accurate at the time of preparation, but the accuracy and completeness of the information is not guaranteed. The investment market commentary in this investment review does not constitute personalised advice. Investors should seek independent investment advice. None of Public Trust, ASB Group Investments Limited, ASB Bank Limited, their related companies, or their directors, board members, officers or employees accept any liability whatsoever for any direct or indirect loss or damage of any kind arising out of the use of, or reliance on, the investment market commentary provided in this investment review.

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