NZ shares led returns again in the September quarter but still lag global and Australian equities by far for the 12-month period according the latest Melville Jessup Weaver (MJW) investment survey.
While most asset classes – bar emerging market equities and bonds – turned in positive results for the quarter, the S&P/NZX 50 was up 5.2 per cent compared to -0.9 per cent and 1.3 per cent for Australian and global share indices (both unhedged).
“Following a tepid June quarter the New Zealand equity market accelerated in September, returning over 5% in the three months. Mainfreight and Ryman, which are among the largest constituents of the S&P/NZX 50 Index, were up 26% and 15% respectively. Z Energy also had a good quarter, up 25%,” the report says. “The local market was, therefore, well ahead of international equity markets which ended the quarter more or less where they began.”
But over the 12 months to September 30, the NZX flagship index returned 13.7 per cent against 26.1 per cent and 23.4 per cent for the respective unhedged Australian and global equities benchmarks.
The MJW report shows local share managers recorded strong relative results (before fees and tax) over the quarter with the median fund outperforming – by double or more in the case of Australasian and hedged Australian funds.
Over longer periods average Australasian (including ‘core’ NZ) equity fund results skew closer to benchmark, although returns of the manager cohort span an almost 5 per cent range even for the 10-year stretch.
Median funds in the MJW survey also beat benchmarks for the quarter in most other asset classes bar emerging markets equities, global value shares and core offshore bonds.
Emerging markets had the worst of the three-month period, down almost 7 per cent (unhedged) while NZ bonds also fell into the red as global fixed income held at about par.
“This brings the twelve month return for the S&P/NZX New Zealand Government Bond Index to -7.2%, while the broader Bloomberg NZBond Composite Index returned -6.1%, its fall softened due to its lower level of duration and higher running yield,” the MJW survey says. “Global bond investors are yet to feel the same level of pain. The Bloomberg Barclays Global Aggregate was about flat for the quarter, although it too is now showing a negative result for the trailing twelve months.”
In spite of the grim fixed income news, the report – authored by MJW principal, Ben Trollip – notes 10-year government bond yields were up to 2.4 per cent and 1.7 per cent in NZ and the US, respectively as at last week.
“While still undeniably low, some prospects for positive returns are returning to bond portfolios – especially after allowing for credit exposure and active management,” the survey says.
The poor bond market returns filtered through, too, to the KiwiSaver market where a handful of conservative funds clocked in negative returns for the quarter, the MJW survey shows.
However, the median KiwiSaver fund was up across all risk profiles ranging from 0.2 per cent for the conservative sector to 1.1 per cent for growth funds. (MJW reports KiwiSaver returns after fees but before tax.)
Milford Asset Management retained the top KiwiSaver return ranking across almost all time periods for its growth, balanced and conservative funds, losing out only in the latter sector to ANZ Default over five years and Fisher Two in the 10-year performance measure.