Investment Returns at 30 June 2021

Investment Returns at 30 June 2021

Investment returns (before tax and fees) for the quarter ending 30 June 2021 are:

Fund 3 months 1 Year (p.a.) 3 years (p.a.) 5 years (p.a.) 10 years (p.a.)
Growth Fund 4.7% 18.7% 11.8% 11.6% 9.8%
Balanced Fund 3.3% 13.0% 8.9% 8.8% 8.1%
Income Fund 0.7% 2.5% 3.6% 3.5% 4.1%

This was another quarter of good returns with shares again putting in solid performances. As economies reopened and combined with positive economic news globally (though it was uneven across regions) many share markets continued to climb higher.

In addition, most Government owned central banks indicated that interest rates would remain low into the foreseeable future (but some added the proviso that their targeted short term cash rates may need to be raised sooner than first thought by them).

The solid rebound or growth was generally better than expected but considered by some to have been the result of significant Government support during the pandemic.

This had some investors concerned that continued large spending plans may lead to an overheated economy and or inflation. Despite the continued rollout of vaccinations around the globe concerns remain.

We continue remain invested and diversified. At the same time, we remain cautious given how fragile markets seem to us (i.e. the elevated nature, relative to historical records, of both share and bond prices).

What is ‘investment risk’?

What is ‘investment risk’?

For many investors “risk” is a scary word when it refers to their investments. A couple of sayings in the investment world are “no investment is without risk” and “investors who take on more risk expect to receive a higher level of return over time”. But what is risk in terms of your investments?

Investment risk is perhaps better called investment uncertainty. Put another way, risk is the chance that an investment’s actual outcome will differ from an expected outcome. The more likely it is that we can predict the future value of the investment, the lower the investment uncertainty (or the lower the risk).

Investments in income assets, like term deposits and bonds, are typically lower risk. We have a pretty good idea what the value will be when the investment matures.

In comparison, investments in growth assets, like shares in companies and property, are higher risk due to the uncertainty of knowing what the future value will be. The several funds within a KiwiSaver Scheme will usually consist of a mixture of these income and/or growth assets.

Here at Christian KiwiSaver Scheme, we have 3 funds for you to choose from: Income Fund, Balanced Fund and Growth Fund. The difference between these funds is the different mix of these investment assets e.g. The Income Fund is made up of only income assets, whereas the Growth Fund is made up of mostly growth assets.

You can choose which Fund – or which mix of funds – is right for you depending on what level your tolerance for risk is. For instance, you may decide to choose a fund that has smaller highs and lows, or you may decide you want a fund with potentially big highs and lows which you can tolerate over a longer time period.

Over the next few newsletters we will be covering more content such as this. We have received many great questions from our members trying to get to know their KiwiSaver better. We hope we can support your financial wellbeing by helping you understand more about your investment.

Investment Returns at 30 June 2021

Investment Returns at 31 March 2021

 

Investment returns (before tax and fees) for the quarter ending 31 March 2021 are:

Fund 3 months 1 Year (p.a.) 3 years (p.a.) 5 years (p.a.) 10 years (p.a.)
Growth Fund 3.5% 23.7% 11.7% 10.9% 9.3%
Balanced Fund 2.1% 16.8% 8.9% 8.4% 7.8%
Income Fund -0.7% 4.3% 3.5% 3.7% 4.2%

The returns for Funds with shares in them (Growth and Balanced) achieved solid results, particularly over the last 12 months. The run up in share prices over the quarter reflected increasing optimism with regards to the economic outlook, largely due to the progress of the vaccine rollout and the fact that some governments (and their central banks) announced ongoing support for the economy (this optimism was in spite of the varying COVID statuses around the world). The 12 month returns cover the period after the significant sell off that occurred in the March 2020 quarter. The OECD* and IMF** both increased their respective global growth forecasts in the quarter. However, as the growth outlook improved some investors became concerned about inflation and or interest rates in the future, and therefore longer term interest rates rose (i.e. bond prices fell). This held back overall returns but led to falls in the quarter for the Income Fund. With interest rates at lows and elevated share prices we remain cautiously invested (that said we should continue to benefit from any further improvement in the growth outlook).

 

*The Organisation for Economic Co-operation and Development (OECD) is an international organisation that works to build better policies for better lives. Their goal is to shape policies that foster prosperity, equality, opportunity and well-being for all.

** The International Monetary Fund (IMF) promotes international financial stability and monetary cooperation. It also facilitates international trade, promotes employment and sustainable economic growth, and helps to reduce global poverty.

Investment Outlook for 2021

Investment Outlook for 2021

It is always difficult to predict what is going to happen. Who would have predicted the pandemic, and the variety of responses, in 2020? Returns in 2021 are likely to be just as interesting. Events like the pandemic come and go but returns over the longer term are almost always positive.  That said, and depending on your timeframe, the starting point is important.

Near term returns can move around a lot. They are very dependent on what governments and ‘experts’ say and do, and reactions to such. Governments are expected to keep interest rates low in the foreseeable future. They are hoping to fuel a recovery in earnings, which in turn should lead to employment and economic growth. Along with additional policy stimulus and increasing vaccination growth is expected to increase over time. On a positive note, the IMF (International Monetary Fund)1 recently raised its global growth forecast for 2021 to 5.5% from the 5.2% it anticipated back in October.

However, given what is considered to be current, by historic measures, high prices in both shares and bonds (low-interest rates) performances in 2021 could be up or down. Issues or events that could affect this year include developments around US policy, ongoing tensions between the US and China, the approach towards Iran, the level of global trade and initiatives adopted that might address climate issues. On top of all that no doubt developments around the virus will continue to have a big impact. In this environment, it pays to tread carefully / invest wisely. Our strategy remains to endeavour to participate well in the current market rally, while still preserving some measure of downside protection against what we believe to be “frothy” markets.

 

 

  1. The International Monetary Fund (IMF) is an organisation of 190 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.
Investment Returns at 30 June 2021

Investment Returns at 31 December 2020

 

Investment returns (before tax and fees) for the quarter ending 31 December 2020 are:

Fund 3 months 1 Year (p.a.) 3 years (p.a.) 5 years (p.a.) 10 years (p.a.)
Growth Fund 6.2% 8.7% 10.1% 10.3% 9.2%
Balanced Fund 4.5% 7.2% 7.9% 8.3% 7.8%
Income Fund 1.4% 4.6% 4.2% 4.4% 4.5%

Returns were solid over the quarter despite the growth in virus cases and renewed lockdown announcements. Equities (shares) in particular posted strong gains with most share markets returning over 10% in the quarter. Investment returns were supported by vaccine approvals, more Government policy stimulus (spending), and clarity on the U.S. election outcome. The strength of our dollar held back gains but our overseas fixed income (bond) funds benefitted from the weak U.S dollar that prevailed. Almost all investments achieved positive returns in the quarter. Whilst it is good that the run of positive returns continues we are concerned, as mentioned here before, that both share and bond prices (in general) are at levels that deem it to be prudent, that is to remain well-diversified and carefully invested. Our active management approach has nevertheless enabled us to find sound investments in most environments.

Your seedlings are growing

Your seedlings are growing

Your Christian KiwiSaver Scheme is unique in having direct investment in a pine forest in the southern Hawkes Bay, Hapua Forest.

Just like KiwiSaver, forestry is a long-term investment with a typical forest usually taking some 25 years to mature. Our forestry land value has soared in recent times as investors have come to realise the ability of forestry to provide a carbon offset.

We’ve almost completed harvesting our first crop which was planted as seedlings in 1992-1993 and since 2018 we’ve been steadily replanting our land. So far over 300,000 seedlings have been planted. The next photo shows an area of seedlings planted in 2018.

Replanting in 2020 faced some obstacles with COVID-19 affecting the availability of labour and the Hawkes Bay drought delaying replanting. Some of the forest land is also not suitable for replanting, we don’t plant along the banks of the waterways and there are areas of native bush that we wish to protect and leave to regenerate. See the photo below of an area of retained native bush.

In our October 2019 article, we mentioned that we source our seedlings from Murrays Nurseries Woodville. Seedlings are ready for planting when 25–30 centimetres tall and are mainly planted by hand. It’s labour intensive and done by skilled teams. The number of trees planted per hectare can vary from 600 to 1,400.

Radiata pine was first introduced to New Zealand in the late 1850s to see if it would be a good candidate for widespread planting. Its excellent growth rate prompted seed imports from California in the 1870s, mainly for shelterbelts and woodlots. By the first forestry planting boom in the 1920s and 1930s, it had been adopted as the species of choice.

It proved to be versatile and grew well throughout New Zealand on a variety of soil types, including coastal sands, heavy clays, gravels and volcanic ash deposits.

Logging is a big deal in New Zealand. It is our third largest industry after dairy and meat.

A third of the world’s radiata forests are grown in New Zealand, with Australia and Chile being other major producers. New Zealand now has 1.75 million hectares of planted forest, of which some 90 percent is radiata pine, much in first rotation forests. These forests cover around 7% of New Zealand, which’s about the same area as 10 Stewart Islands. A substantial part of New Zealand (24%) is also covered in indigenous (native) forest.

There are other articles on Hapua Forest in February 2019 and October 2019.