Reasonably steady markets during the September quarter saw most asset classes and managers booking positive returns over the three-month period, according to the just-released Melville Jessup Weaver (MJW) investment survey.
The MJW report shows the average manager also outperformed, before fees, their respective benchmarks across the majority of asset classes bar NZ listed property and global shares (with one exception).
While the MJW measure of global core, value and emerging market equities shows the median manager falling under benchmark for the September quarter, the average growth fund almost doubled index returns.
The most recent global shares data shows again that the long-standing growth/value disparity has yet revert to the mean. For the three months ending September 30, the average value international shares manager was up 3 per cent, the MJW report says, compared to almost 9 per cent for growth counterparts.
Over the 12-month period, the median growth-value global equities gap stood at 21.6 per cent against -7.2 per cent.
In fact, the chasm between the best-performing growth manager and the worst value fund result over the annual period was almost 50 per cent: MJW figures show the growth-oriented Artisan Global Opportunities Fund was up 33 per cent for the 12 months ending September 30 against -16.3 per cent recorded by the Dimensional Fund Advisors (DFA) value strategy. DFA value is now bottom in its category across all periods covered in the MJW survey.
While Artisan is a pure wholesale manager in NZ with, perhaps, a handful of clients, DFA has a large retail following among certain advisory groups here.
The MJW study also found the KiwiSaver market in good health during the September quarter as the bounce-back from the March COVID-19 shock continues apace. All funds across every risk category were in the black for the quarter and all other periods going back 10 years, the survey shows.
Median KiwiSaver quarterly returns ranged from 2.1 per cent for conservative strategies to 4.2 per cent for growth, according to the MJW figures, with Generate, in particular, enjoying a good patch winning the race in both the growth and moderate categories. The Nikko Balanced fund (an option in the AMP KiwiSaver scheme) was also the quarterly stand-out in its field, returning 6 per cent versus the median 3.6 per cent – only SuperLife came close with a 5.4 per cent result.
During the 10-year period, Milford Asset Management remains ahead in the balanced and growth KiwiSaver camps, although the range between best- and worst-performer narrows for the longer timer horizons.
The MJW report also includes an insight into the investment performance of the consultancy firm’s underlying clients with “most being above the 75th percentile of peers” over the medium term.
Ben Trollip, MJW principal, says in the report: “The variation in short-term results is not something we are apologetic about. We believe that this demonstrates our ability to work with clients in different circumstances, who need to implement different portfolios for their particular context. While market conditions will see shorter term fluctuations, strong investment governance structures ensure good long-term results.”
Despite the aura of positivity as reflected in the September quarter results, Trollip says the “outlook remains very challenging”.
“In particular, investors with large allocations to cash and bonds are staring down the barrel of a very low return environment – one which may see them fall behind inflation targets,” he says. “However, simply moving up the risk spectrum in pursuit of higher returns cannot be done without care. A considered investment approach, with a robust and diversified asset allocation, skilled investment managers, and appropriate monitoring, is paramount.”
But in more positive news, another MJW study released last week found an unexpected mortality improvement for NZ during the COVID-19 infected 2020 to date. According to the MJW analysis, the country will see almost 2,000 fewer deaths than trend forecasts for this year. The overall NZ mortality rate is now at the lowest level seen in MJW data stretching back to 2012.
While the ultimate cause of the declining death-rate remains shrouded in mystery, the MJW study says “a plausible hypothesis is that lockdown has led to fewer respiratory diseases, such as influenza and the common cold, circulating in the community”.
Tellingly, the over 80-year old cohort benefited most from the mortality extension, with death-rates falling about 2 per cent below the average from May to September this year.
“New Zealand’s mortality rate has been trending downwards for decades. By and large, this has come from improvements in healthcare,” the report says. “Even so, it is evident that lockdowns, social distancing, and improved hygiene practices (e.g. hand-washing and facial coverings) appear to be having an observable effect on mortality.”