February 2019 - Christian Kiwisaver Scheme
Investment returns to 31 December 2018

Investment returns to 31 December 2018

The December quarter saw a sharp drop in the value of shares which resulted in negative performances for the Growth and Balanced Funds. Strong performances in earlier times, however, ensured that returns remained positive in periods greater than 1 year.  While our funds performed better than most for the quarter (reflecting our more conservative investment philosophy), negative performances are never nice to experience and can be frightening. However, they need to be kept in perspective i.e. remember the great and stable returns leading up to them! Diversification benefits were also evident in the quarter as gains on income assets (bonds) partially offset losses on growth assets (shares).

It’s important when there’s been a significant drop in the markets not to be alarmed. Remember that returns are generally positive over longer time frames. Interestingly, since 1 January this year share markets have rebounded significantly (by about 7% in January).  What caused the bout of volatility throughout the December quarter? Even though a number of the concerns had been around for a while investors got more nervous in the quarter about some items including China and U.S. trade war developments, Brexit, global growth and monetary policy (particularly in the U.S.).

Large fluctuations in asset prices will inevitably occur again. In this more volatile environment, we remain extra vigilant, diversified and cautious in our approach to investing your monies.

Investment returns at 31 December 2018, before fees and tax:

Fund 3 months 1 Year (p.a.) 3 years (p.a.) 5 years (p.a.)
Growth Fund -5.7% 1.3% 7.6% 8.2%
Balanced Fund -3.7% 1.6% 6.5% 7.1%
Income Fund 0.6% 2.2% 3.8% 4.4%

We have two important messages for you. Firstly, again, don’t panic and secondly make sure you are in the investment fund that best suits you. Changes in the investment markets don’t change your investor type. Changes in your personal circumstances are what influence your investor type.

Over time investment markets will have their ups and downs and occasionally the downs are large enough to result in a negative return. The December quarter is just one quarter. In the last 20 quarters (5 years), our Income Fund has had 18 positive quarters, the Balanced Fund had 17 and the Growth Fund had 16.

Ethically growing your investment

Ethically growing your investment

As Christian KiwiSaver Scheme members we are a group of “ethically-minded Christians” who believe in the value of sound stewardship and in investing in assets that reflect Christian values.  That could sound rather boring and dull.

However, one of our investments is neither boring nor dull but rather exciting.  Back in 1992, The New Zealand Anglican Church Pension Board had the foresight to purchase a block of land in the Tukituki Valley, a spectacular part of the Hawkes’ Bay.

The Māori word ‘Tukituki’ means to demolish; this possibly refers to the power of the river when it is in full flood.  The Tukituki River flows all the way from the Ruahine Ranges out to the Pacific Ocean in the southern part of the Hawkes’ Bay coastline.

Aerial view of Hapua Forest Park before harvesting.

While that English translation of Tukituki has that meaning of demolition, the Board’s investment in the Tukituki Valley had the opposite meaning.  The Board purchased that block of land and developed a 672 hectare pine forest which it named Hapua Forest.  That block is bringing new life and growth.

The first forest was planted during the 1992-1993 season.  This planting occurred at a time when planting trees were not seen as positively as today in terms of countering the effects of global warming.  During their lifetime, these trees bring new life and contribute positively to their environment by, such things, providing oxygen and improving air quality, conserving water and stabilising the soil.

As you can see from the picture below, that first forest has now matured and is in the process of being harvested.  Harvesting started back in 2016 and should be completed during 2019.

Harvesting in the Hapua Forest.

But the land is not being left barren once that first crop is harvested.  As land becomes available after the harvesting, further tree planting is occurring.  This process started during the 2018 winter.  So far, approximately 62,500 new seedlings have been planted. Up to now, one quarter of the forest area has been replanted.

New seedling growing in Hapua Forest Park.

Whereas members in other KiwiSaver schemes may have shares in a forestry company, Hapua Forest is something that Christian KiwiSaver Scheme members directly own part of.  While the Board bought the Hapua Forest back in the 1990s, the Christian KiwiSaver Scheme has owned a portion of it since the Scheme started in 2007.

Just as the trees in the Hapua Forest take up to 25 years to mature before they could be harvested, KiwiSaver savings are also a long-term investment looking toward when we retire and can benefit from the savings.  For younger members that could be around 40 years – a period akin to nearly two crops of maturing pine trees at the Hapua Forest.  Like the value of those trees in the Hapua Forest our KiwiSaver investment will fluctuate in value over time but will benefit Scheme members and our climate over their life.