The COVID crash has officially faded into history, according to the latest Melville Jessup Weaver (MJW) quarterly investment survey, for investors with a five-year memory limit at least.
Despite a rough first three months for equity markets this year, the five-year KiwiSaver return figures, for instance, improved markedly quarter-on-quarter as the March 2020 pandemic rout rolled off the statistical series.
William Nelson, MJW senior analyst, said in the report: “Curiously, investors at all risk levels will have noticed their five-year result improve in spite of the turbulence over the first quarter. For example, most investors with a balanced strategy will have seen this number rise around 2 percentage points per annum.
“This is because the five year period now excludes the Covid-19 related nosedive in the first quarter of 2020. So this time period has now traded a severely weak quarter in 2020 for an only slightly weak one in 2025.”
But while the five-year uplift might provide a psychological boost to medium-term investors, the March quarter slump saw the majority of KiwiSaver diversified funds (bar most in the conservative category) end in the red.
The slide in developed world share indices also triggered somewhat of a rotation in the MJW KiwiSaver rankings where defensively positioned managers rose to the fore compared to the more bullish December 2024 quarter.
“Predictably enough, investors with higher policy weights to growth assets will have had a disappointing quarter,” Nelson said.
Milford, in particular, benefitted from a growth-underweight that had seen the manager fall off the pace last year: the manager reported the lowest allocation to risk assets in the MJW growth cohort of just 68.3 per cent versus the average of almost 79 per cent.
The March quarter also showcased the impact of diversification as positive returns from bonds, property, emerging markets equities, commodities and other neglected asset classes contrasted with heavy losses in US share markets, especially.\Listed infrastructure, in particular, “has stood out so far this year, delivering healthy returns in the troubled market conditions”, the MJW report says.
“These stocks are fairly well protected from trade issues and economic slowdowns, being in general locally regulated businesses and delivering essential services. However, this is perhaps also a result of the general risk-off sentiment in markets, also seen in the dominance of value-oriented stocks compared to growth stocks this quarter.”
The MJW group of global listed infrastructure managers reported a median return of 5 per cent for the quarter and 15.4 per cent for the 12 months to March 31, topped by Kernel in both periods with respective returns of 6.5 per cent and 20.7 per cent.
Value managers also beat the negative trend in international equities where the average fund in the MJW cohort was up 4.1 per cent in the quarter and 12.8 per cent over the 12-month period: in a sharp reversal of fortune, global shares growth managers were down -3.7 per cent on average during the three months while lagging value counterparts by 2.7 per cent for the 12 months to March 31.
Amid a miserable quarter for Australasian equity managers, Pie Funds turned in positive results for two of its small cap strategies. The flagship Pie Australasian Growth fund returned 5.4 per cent for the three-month period while the Emerging Companies strategy was up 4.8 per cent.
Nelson notes the March quarter produced another historic move.
“Last quarter, we wrote about the increasing concentration issues in the US stock market. This has since dissipated appreciably,” he says. “The total market share of the ‘Magnificent Seven’ companies has shrunk from 23.8% of the developed market portfolios at the end of 2024 to 20.7% by this quarter’s end.”
The Mag-7 weight declined further in April to 20.1 per cent with COVID-era star, Tesla, slipping out of the elite group as semi-conductor firm, Broadcom, overtook the struggling EV-maker.