Auto Draft

Investment Returns at 30 September 2022

Investment returns (before tax and fees) for the quarter ending 30 September 2022 are:

Fund 3 months 1 Year (p.a.) 3 years (p.a.) 5 years (p.a.) 10 years (p.a.)
Growth Fund 0.7% -2.4% 6.0% 7.7% 8.2%
Balanced Fund -0.0%* -3.5% 3.7% 5.5% 6.6%
Income Fund -1.1% -5.4% -0.5% 1.1% 2.5%

* rounded to one decimal place.

 

Share markets were generally flat over the quarter. The fall in international share markets was offset by a fall in the New Zealand dollar. The New Zealand dollar fell as investors became concerned about the local growth outlook and that interest rates on offer may be better later overseas.

The downward movement in the New Zealand dollar could be considered a double edged sword. Exporters may be happier but imports may become dearer. Bond prices continued to fall (i.e. interest rates continued on their upward march this year) as major central banks around the world remained concerned with regards to the near-term inflationary outlook and conveyed their views as to the need for potentially higher short term interest rates. They hope to offset the rising cost of living that people are experiencing, by reducing demand for goods and services but without causing a recession or a large slowdown in the economy. The relentless rise in global interest rates continues to put downward pressure on share markets.

The recent return of large movements (up and down) in the share markets demonstrate their hyper-sensitivity to economic news and expectations. Political events added to the volatility (e.g. the proposed tax cuts and spending plans in the UK, subsequent U-turns in policy and the resignation of the UK Prime Minister).

The global economy is in unchartered territory with markets more focused on inflation and interest rates and less on company fundamentals. Outcomes in this respect are very hard to predict.

The International Monetary Fund (IMF) signalled a downgrade, for the fourth consecutive quarter, to its updated global growth forecasts in early October. The head of the IMF said that a third of the world’s economy would suffer a recession next year and many others would feel like they were in recession, against backdrop of shrinking real incomes and rising prices.

A lot of pessimism has been priced into markets this year, and there has been significant conjecture about where interest rates, inflation and the broader economy are heading.

Optimists point to leading indicators of inflation falling rapidly, setting up 2023 for a year of big declines in measured CPI (Consumer Price Index) inflation, while pessimists raise the idea that inflation will remain sticky, like it did in the 1970s, and it will take much higher interest rates to bring inflation under control.

Given the economic background which suggests a challenging time ahead for company earnings, uncertainty around company outlooks and consumer spending we remain cautiously invested, diversified and continue to hold higher than normal amounts in cash.

What is happening with KiwiSaver?

What is happening with KiwiSaver?

There has been a lot of movement in the market recently which may be worrying KiwiSaver scheme members around the country.

While KiwiSaver is a long-term retirement investment, you will have seen that annual performance is down. So, what do you need to know about what is happening with KiwiSaver?


What do you need to know?

KiwiSaver is an investment. This means that you are an investor and through this retirement scheme, your money is invested into the market. We at Christian KiwiSaver Scheme carefully manage your money in the effort to grow your investment and to minimise losses.

Depending on your situation, you may also be receiving additional contributions from your employer and/or the Government which you generally would not be receiving outside of a KiwiSaver scheme.

Previously, KiwiSaver schemes have had periods of strong positive returns. In recent years, particularly since the COVID pandemic, the market has not performed so well. The thinking in the market is that it is normal to have this sort of rebalancing period, particularly with these types of unprecedented events.

Most KiwiSaver schemes are in the same boat. Schemes are carefully watching the market and are all subject to its performance. KiwiSaver schemes are also tightly regulated by the Financial Markets Authority who enforce rules for the protection of consumers.


What can you do?

  • It is important to remember that KiwiSaver is a long-term investment. While KiwiSaver has experienced a turbulent time in this past year, you can see that our 5 years (p.a.) and 10 years (p.a.) investment returns are positive.
  • Last quarter we published an article to help you navigate through this potentially confusing time. Our message is very much the same, i.e. that you look at your investment goals and remember why you chose your particular fund rather than making any sudden decisions. You can view that article here.

While the future is always uncertain, the recent performance of the market can be seen as part of the investment experience where we will experience general ups and downs.

Anglican Financial Care (AFC), the fund manager of Christian KiwiSaver Scheme, is an organisation with long-standing experience. Established in 1972, AFC is celebrating 50 years of serving its members this year. We look forward to continuing to serve your KiwiSaver needs.

“I have told you these things, so that in me you may have peace. In this world you will have trouble. But take heart! I have overcome the world.”

John 16:33 (NIV)

Auto Draft

Why are conservative funds losing money?

Some KiwiSaver investors who have their money in a conservative fund have been shocked by recent performance. Typically, these types of funds have been seen as “less risky”, but given their recent losses you too most likely want to know why these types of funds are losing money.

The performance of conservative funds are strongly linked with interest rates. If interest rates go up, as they have been recently, then the investments of the fund will generally go down in value (which leads to negative returns). However, if interest rates go down then the investments of the fund may go up in value (which leads to positive returns).


Why are interest rates going up?

Interest rates are increasing because our official cash rate (and many around the world) has been going up. The Reserve Bank of New Zealand (and other major central banks around the world) uses the official cash rate as a tool to set interest rates that try to fight inflation.

Their hope is that interest rate increases will lead to a slowdown in demand and therefore lower inflation. One example of this is that people may decide to spend less on products because of the higher interest rates. The idea is that there is a flow-on effect so that companies will begin to charge less for their products as they see people beginning to spend less.

The amount that we spend/purchase and the amount companies charge for their products are part of what affects whether interest rates go up or down. For instance, if demand does slow down enough then this might mean interest rates may not need to rise anymore.

Interest rates and inflation are not just influenced by what happens locally, but are also influenced by what happens around the world. In the recent past, we have had very low interest rates. Sudden big events, such as the war in Ukraine and COVID, may be part of the surprising inflation we are currently experiencing – and the big increase in interest rates we are experiencing now.

We at Christian KiwiSaver Scheme have certainly been doing our best to minimise these negative returns, however when the market has been performing this way it is sometimes difficult to do so.

Our investment style, with a focus on capital preservation and diversification, aims to reduce the losses that can prevail in these more uncertain periods.

Important requirements for our members

Important requirements for our members

We will be requesting some simple but important information from some of you in the next few weeks to help us fulfil our obligations under the Anti-Money Laundering legislation. This information will help us update your records to fulfil compliance requirements.

Meeting compliance obligations is of utmost importance for us here at Christian KiwiSaver Scheme so that your trust in us is unquestionable.

In the next few weeks, our Chief Executive will be sending some of our members emails (or, where we do not hold your email address, letters) asking you to provide us information to help us fulfil compliance requirements.

When you receive this communication, please complete the instructions. The whole process should be relatively easy and take less than a minute, but if you have any questions, including whether or not the email or letter you receive is legitimate, then please do not hesitate to contact us. If you do not hear from us, you do not need to do anything – your information is up-to-date.

Investment Returns at 30 June 2022

Investment Returns at 30 June 2022

Investment returns (before tax and fees) for the quarter ending 30 June 2022 are:

Fund 3 months 1 Year (p.a.) 3 years (p.a.) 5 years (p.a.) 10 years (p.a.)
Growth Fund -5.1% -1.0% 7.0% 8.3% 8.5%
Balanced Fund -4.4% -2.3% 4.7% 6.1% 6.9%
Income Fund -2.6% -4.6% 0.2% 1.5% 2.8%

Are we closer to an upward move in markets? Most major share markets fell, (between 10% and 20%), and bond (fixed income) markets fell (between 1% and 6%), in the quarter.

Market participants continue to fret about the outlook for inflation and growth. Many central banks around the world have begun (or are expected to) to raise their official cash interest rates. They continue to indicate that they will keep raising rates until they feel they have inflation expectations under control. Markets are concerned that central banks may raise interest rates too far and or too fast. This raising of rates will have an impact on economic growth. Some fear that the raising of rates could result in a recession, which is known technically as two consecutive quarters of negative growth. However some also think that central banks may not be far from finishing raising rates. They point to signs of a slowdown in economic activity and that inflation expectations are under control, and therefore growth may not be as negatively impacted as expected i.e. we are past the worst and the markets may be guilty of over-pricing in negative outcomes.

We remain cautiously invested, diversified and continue hold higher than normal amounts in cash. This is our defensive approach to the current situation.

Stay strong, do not panic (Psalm 31:24)

Stay strong, do not panic (Psalm 31:24)

It is potentially a confusing time right now for anyone with a KiwiSaver who is aware of how markets are currently performing. It may cause us to scramble and to think if there any quick decisions or actions we can make as a response. This is a message of assurance to not panic and that we are here for you.

What is important to remember is to stick with your plan and not to make sudden decisions like changing your fund as a knee-jerk reaction. Look at your own situation and determine whether you are in the right fund for your circumstances. If you need more information about our different fund types, click here.

Samantha Barrass, the Chief Executive of Financial Markets Authority New Zealand (FMA), recently spoke with NBR and reminded investors that markets do recover.

“If you’re investing for the medium to long term, it’s best you hold your nerve and not leap into more conservative funds because you will just crystallise your loss at the point… Hold the course, don’t panic”. (McNicol, 2022)

Recently, in June 2022, the FMA also published research around New Zealanders’ attitudes towards financial markets and investing. Here are some highlights which may help inform your thinking during this time:

  • “Eight in ten New Zealanders hold at least one investment product (82%). KiwiSaver is still the most commonly held among New Zealanders (64%).”
  • “Nearly three-quarters of investors (74%) feel slightly, fairly or very confident that New Zealand financial markets and financial service providers offer good long-term opportunities for investors.”

If you are interested in more information about this research from the FMA, click here. If you are seeking financial advice, we recommend you speak with a financial advisor.

Anglican Financial Care (AFC), the fund manager of Christian KiwiSaver Scheme, is an organisation with a long-standing experience. Established in 1972, AFC is celebrating 50 years of serving its members this year. We look forward to continuing to serve your KiwiSaver needs.

“Who is like you, Lord God Almighty? You, Lord, are mighty, and your faithfulness surrounds you. You rule over the surging sea; when its waves mount up, you still them.”

Psalm 89:8-9 (NIV)

 

Notes

McNicol, H. (2022, June 16). Biblical turbulence: Kiwis should hold nerve as confidence slips. NBR. Retrieved from https://www.nbr.co.nz