Only three NZ share core funds eked out positive returns in the final quarter of 2021 in a tough end-of-year session for local markets, according to the latest Melville Jessup Weaver (MJW) investment survey.
But despite the meagre returns from NZ equities during the three months to December 31 – topped by a 1.9 per cent from the Salt NZ Share Plus fund – the median manager return of -1.1 per cent still outperformed the calibrated S&P/NZX 50 Portfolio Index by 1 per cent before fees, the MJW data shows.
The regular S&P/NZX 50 index was down 1.7 per cent over the three-month period and just above par for the year, putting the NZ market at odds with other developed countries.
“This reversal marks the end of a long trend of the New Zealand market outperforming world markets more broadly. The following chart shows calendar year performance over recent years. The last year in which the New Zealand market was outperformed by the MSCI World Index was 2013,” the MJW survey says.
“…Like New Zealand, many emerging share markets have also had a mediocre quarter, investors preferring the safety of larger markets such as the US to generate their returns.”
However, the report – authored by MJW investment consultant, William Nelson – confirms NZ equities remain ahead for the 10-year stretch to the end of 2021.
“Over the last ten years, the average return from the New Zealand market has been 16.1% per annum, compared to 13.6% from other developed markets,” Nelson says.
Along with Salt, both Harbour Asset Management and Mercer kept their respective core NZ share funds (which can include some Australian stocks) just above water in the quarter with returns of 0.1 per cent.
Fisher holds the number one spot for core NZ equities over the three- and five-year periods while Milford Asset Management leads the 10-year field with annualised returns of 20.5 per cent.
Newcomer to the MJW local shares table, Trust Management, recorded the best 12-month performance of 8.8 per cent against the median 3.7 per cent. Previously known as a charitable fund specialist, Trust converted its funds to portfolio investment entities from the old group investment fund structure in 2020 in a bid to compete in the wider wholesale market.
The survey also highlights the ongoing tussle between value and growth in global share markets: the median value manager in the MJW survey was up 28.4 per cent during 2021 compared to 22.8 per cent the average growth fund; for the December quarter, however, the median value manager returned 4.9 per cent against 7.1 per cent in the growth sector.
Meanwhile, the ANZ blended Vanguard/Northern Trust Asset Management fund headed the core global shares group for both the quarter and year – with respective returns of 10.3 and 32.8 per cent.
Fixed income investors saw either small or negative returns last year as bond markets braced for rising rates, the report says.
“Portfolios continued to suffer capital losses as interest rates ticked up across most markets,” Nelson says. “…Bond investors have been bruised over the past year and the prospect for further losses has made the sector look distinctively unpalatable. We have, of course, the potential for higher running yields in future but this can only come at the cost of further capital losses in the shorter term.”
Regardless, he says bonds still have a role to play as a buttress against falling equity markets.
Asset class performance rotation last year also saw KiwiSaver leaders change somewhat during the period, the MJW survey says.
“… KiwiSaver providers with higher global exposure have been the ones to have performed the best,” the report says. “The best example of this is the Kiwi Wealth Scheme, which achieved a [quarterly] return of 6.1% for its Growth Fund.”
The survey has yet to capture performance of the six new balanced default KiwiSaver funds, which began operation on December 1 just in time for the bout of severe market volatility of early 2022.