• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to secondary sidebar
  • Skip to footer
  • Subscribe
  • Twitter
  • RSS Feed

Investment News NZ

Investment News provides financial advisers news stories from the financial industry in New Zealand. Subscribe to our free weekly newsletter.

  • Home
  • News
  • Kiwisaver
  • Subscribe
  • About
  • Advertise
  • Contact
You are here: Home / Investment News / Bonds, NZ equities exposure hurts in December, MJW

Bonds, NZ equities exposure hurts in December, MJW

January 22, 2017

Ben Trollip: MJW investment consultant

The December quarter saw some sharp reversals in fund manager rankings as asset allocation calls were answered during a hectic period for markets, according to the latest Melville Jessup Weaver (MJW) investment survey.

Most notably in the KiwiSaver space, the government-owned Kiwi Wealth scheme jumped from bottom-dwelling over the one-year period to top or podium finishes in all three of the risk categories it competes in – primarily due to the manager’s heavy weighting to international shares, winner of the best-performance in an asset class for the December 2016 quarter.

Conversely, KiwiSaver managers with high exposure to New Zealand shares – which fell 6.4 per cent in the December quarter as global equities rose 6.2 per cent on an unhedged basis – suffered over the three-month period.

“For example, Milford’s Active Growth fund (which has 58% in domestic shares and just 10% in global shares) fell 0.9% over the quarter, while KiwiWealth (which has almost all of its equities invested offshore) rose 4.3%,” the MJW survey says. “This dynamic, of course, reverses when longer term returns are considered. Milford is first in its group over five and nine year periods.”

AMP also staged a comeback in all of the KiwiSaver risk profiles measured by MJW, particularly in the conservative sector where its almost $1.3 billion default fund was one of only two to report a positive return over the quarter.

“For the conservative funds, the losses [median fund down 0.7 per cent] reflect the generally large weightings to fixed income; the average allocation to bonds is a sizeable 57%,” the MJW report says. “The top performing conservative fund this quarter was AMP – Default, which has almost 50% of its assets in cash.”

The MJW survey reveals a similar dynamic in the wholesale market with the 12-month top-performing NZ equities fund, the Castle Point Trans-Tasman strategy, almost exactly swapping positions with the December quarter king, Salt Funds Focus Share, which was the worst-performer over the year – albeit with all local share managers in negative territory for the three-month period (median return -5.1 per cent).

“Over the quarter, the New Zealand share market gave back a significant proportion of its previous gains,” the MJW report says. “This, too, was largely driven by bond yields; the desirability of New Zealand stocks is strongly linked to their relatively high dividends. So, as bond yields rise, investors leave our share market and return to bonds.”

However, Australian shares rose strongly over the quarter, reversing a long-standing trend versus the NZX and bringing both markets close to parity for the 12-month period.

“The S&P/NZX 50 has returned 10.1% compared to the S&P/ASX 200’s 9.2% (NZ dollar terms),” the MJW survey says. “With that said, the Australian share market does have some way to go to catch up to the NZX. The three-year figures show a difference of almost 10% pa between the two.”

Rising bond yields were, though, the most significant factor for investment markets over the previous three months, according to the MJW report authored by investment consultant, Ben Trollip.

The NZ fixed income index dropped 3.4 per cent in the December quarter as global bond benchmark (fully-hedged) fell 2 per cent over the period.

While yields have been climbing steadily over the year, the election of US president Donald Trump – and the expectation he will stoke inflation – accelerated the trend. The benchmark US 10-year Treasury yield jumped more than 40 per cent over six weeks late in 2016, rising from 1.8 per cent on US election day to 2.6 per cent as at December 15.

“While these losses in fixed income were painful, longer term results remain healthy,” the MJW report says. “Even allowing for the December quarter, the domestic and global bond indices have returned 5.5% pa and 7.1% pa respectively over the last three years – well above the result from cash (3.1% pa).

“We may well be at a turning point for yields but the bond bears should hold off their gloating just yet.”

Print Friendly, PDF & Email
Twitter0
LinkedIn0
Google+0
Facebook0

Read More » Investment News

Recent articles

  • Ares to pay A$1.35 billion in mooted AMP Capital private JV February 26, 2021
  • Providers point to wholesale bad ad outcomes in FMA guidelines February 21, 2021
  • NZX holds to $50bn platform 2023 target; Smartshares hits $5bn two years’ early February 21, 2021
  • Carbon fever: metrics matter as transition takes hold February 21, 2021
  • Clean money cures: more AML medicine arrives February 21, 2021
  • Bryan Gray released after 32 years in custody February 21, 2021
  • Passive policing: why index-trackers need regulation February 21, 2021
  • Reddit v AMC: the disaster movie with a happy ending for bond investors February 21, 2021
  • Global debt peaks about US$280tn as world climbs worry wall February 21, 2021
Finished reading? Why not subscribe? To receive a weekly email enter your email address here.

Primary Sidebar

WEEKLY NEWSLETTER

Sign up here to receive our weekly newsletter.
Learn More »

Investment News

  • Ares to pay A$1.35 billion in mooted AMP Capital private JV February 26, 2021
  • Providers point to wholesale bad ad outcomes in FMA guidelines February 21, 2021
  • NZX holds to $50bn platform 2023 target; Smartshares hits $5bn two years’ early February 21, 2021
  • Carbon fever: metrics matter as transition takes hold February 21, 2021
  • Clean money cures: more AML medicine arrives February 21, 2021
  • Bryan Gray released after 32 years in custody February 21, 2021
  • Passive policing: why index-trackers need regulation February 21, 2021
  • Reddit v AMC: the disaster movie with a happy ending for bond investors February 21, 2021
  • Global debt peaks about US$280tn as world climbs worry wall February 21, 2021
  • The state of the pension fund world February 21, 2021

Search by Keyword

Most Recent Investment News

Ares to pay A$1.35 billion in mooted AMP Capital private JV

February 26, 2021

Providers point to wholesale bad ad outcomes in FMA guidelines

February 21, 2021

NZX holds to $50bn platform 2023 target; Smartshares hits $5bn two years’ early

February 21, 2021

Carbon fever: metrics matter as transition takes hold

February 21, 2021

Clean money cures: more AML medicine arrives

February 21, 2021

Investment News Archive

Most Popular Articles

  • NZ share-trading splurge could trigger tax alarms… posted on October 5, 2020
  • Westpac NZ flags retail advice sale to Forsyth Barr posted on October 19, 2020
  • Flint set to spark platform competition posted on August 17, 2020
  • The horror year in technicolour: free KiwiSaver 13 report released posted on September 30, 2020
  • Four to the core: Smartshares to expand, rearrange and reprice ETFs posted on June 22, 2020
  • Kitset KiwiSaver scheme set to unwrap in spring posted on April 27, 2020
  • Funds eye bargains, self-shoppers hoard cash, KiwiSavers turn conservative posted on March 15, 2020
  • AMP Capital NZ chief quits amid equities exodus offshore posted on August 28, 2020

Sponosored Content

David-Boyle

Jumping lessons: what all investors can learn from GameStop loss

What do ‘Kiwi’ experts see for 2021?

David-Boyle

On the industry play-list: four chart-topping regulations for 2021

David-Boyle

Charge of the lite (advice) brigade

Quick-links to Popular News

  • FAP Compliance
  • Coronavirus
  • New Appointments
  • Financial Markets Authority (FMA)
  • Kiwisaver
  • Climate Change
  • Crypto Currency
  • Blockchain
  • Insurance

Secondary Sidebar

Recent News

  • Ares to pay A$1.35 billion in mooted AMP Capital private JV February 26, 2021
  • Providers point to wholesale bad ad outcomes in FMA guidelines February 21, 2021
  • NZX holds to $50bn platform 2023 target; Smartshares hits $5bn two years’ early February 21, 2021
  • Carbon fever: metrics matter as transition takes hold February 21, 2021
  • Clean money cures: more AML medicine arrives February 21, 2021
  • Bryan Gray released after 32 years in custody February 21, 2021
  • Passive policing: why index-trackers need regulation February 21, 2021
  • Reddit v AMC: the disaster movie with a happy ending for bond investors February 21, 2021
  • Global debt peaks about US$280tn as world climbs worry wall February 21, 2021
  • The state of the pension fund world February 21, 2021

Footer

Copyright ©2020 InvestmentNews.co.nz — All Rights Reserved ·— Terms & Conditions