All but one KiwiSaver fund and most other strategies covered in the latest Melville Jessup Weaver (MJW) survey bled red ink in the September quarter with cash the only asset class offering much respite.
Sporting a zero per cent result for the three-month period, the BNZ First Home Buyer fund was the single non-negative performer in the MJW KiwiSaver universe as median returns ranged from -1.3 per cent for conservative strategies to -2.4 per cent in the growth category.
Despite the poor quarter, all but one KiwiSaver fund ended the 12 months to September 30 in the black with clean sheet spoiled by the -2.1 per cent return for the ASB Positive Impact product.
SuperLife turned in the best quarterly result among default providers of -1.5 per cent as the NZX-owned manager also implemented an asset allocation shift in the period. The MJW survey shows the SuperLife default fund came into line with peers after adding global bonds to the mix.
Since inception of the new balanced fund default regime in December 2021, SuperLife has eschewed international fixed income but reported an allocation of 23 per cent to the asset class at the end of September.
The SuperLife default global bond pivot came at the expense of local fixed income, which was downgraded to an allocation of 13.9 per cent compared to 35.8 per cent at the end of June this year.
Outside of the KiwiSaver sector, just a handful of funds in the MJW survey reported positive results for the quarter including several PIE Funds Australasian small-cap offerings, a smattering of global equity (mostly value) strategies and a few other outliers.
Cash (up 1.4 per cent) was the sole asset class to stay above water in the quarter with the rest ranging between -1 per cent for unhedged emerging markets to -6.8 per cent for global infrastructure.
For the 12 months to September 30, global shares has been the stand-out asset as the hedged benchmark ended up 20.5 per cent (14.8 per cent unhedged). Off almost 4 per cent for the period, Australasian listed property recorded the worst 12-month result while local bonds (-1.7 per cent) also struggled.
NZ shares also flagged relative to global counterparts over both the year (3 per cent) and quarter (-4.8 per cent), bringing the local market’s relative returns about in line with global benchmarks after a long period of outperformance.
“The fortunes of domestic equity investors have varied significantly from developed markets more broadly over recent years,” the MJW report says. “New Zealand has delivered significant additional return over the MSCI World Index for most of the last decade. However, since 2020, this premium has been rapidly whittled away…”
Over the 10 years to September 30, both NZ and developed market shares have grown $100 into about $250, according to the MJW figures, after local shares had held a significant advantage since about 2015.
The report, authored by MJW investment consultant, William Nelson, also sticks up for bonds in spite of an almost three-year losing streak for the asset class.
“In this environment, cash has been king and essentially the only asset class to provide a positive return for the quarter. It has perhaps been increasingly tempting to question the status of bonds altogether, since they have provided neither the long-term growth of equities nor the stable returns of cash,” Nelson says. “Nevertheless, we continue to see bond mandates as important as an ‘insurance policy’ with the potential to appreciate in value in times when equity markets are struggling.”