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Investment Returns at 31 March 2023

Investment returns (before tax and fees)* for the quarter ending 31 March 2023 are:
Fund 3 months 1 Year (p.a.) 3 years (p.a.) 5 years (p.a.) 10 years (p.a.)
Growth Fund 4.3% 1.9% 10.3% 8.5% 8.3%
Balanced Fund 3.6% 0.7% 6.9% 6.1% 6.6%
Income Fund 1.9% -1.0% 0.5% 1.4% 2.6%

This latest quarter saw better returns than last year when interest rates rose (both bond and shares prices fell). The first quarter of this year began with positive sentiment on the growth outlook as energy costs fell and China’s economy reopened.

Due to swift action by the regulatory authorities, the global banking sector now appears less of a concern. However, those actions may result in slower credit creation, which could lead to slower growth (e.g. tighter lending standards as banks become more cautious).

The banking concerns in March dwarfed concerns around inflation. As markets reacted to fears of a banking crisis, government bond markets went from pricing in rate hikes (i.e. falling bond prices) to pricing in rate falls later this year (i.e. where bond prices rise).

Global equities also gained in the quarter, buoyed by declining recession worries in developed markets.

Locally the Reserve Bank of New Zealand (RBNZ) surprised the market in February 2023 with a 50 basis points increase in the Official Cash Rate (OCR), thereby lifting the OCR to 5.25%. The concern is that the domestic economy may already be slowing. The RBNZ is expected to increase the OCR by another 25 basis points (to 5.50%) in May 2023. The market’s attention could then increasingly focus on the timing and extent of the next easing cycle.

Despite the banking sector concerns, Central Banks continued to fight inflation with tighter monetary policy (via official cash rate increases).

While there were signs that hiking cycles were already biting (particularly in housing markets), we think the full spill-over effects to the broader economy are yet to come.

In our view, the inflation outlook is mixed. Whilst inflation appears to be reducing (largely on the back of lower oil prices), we remain concerned that demand still appears to be strong, for example, food and rental prices. Wage growth in this tight labour market is also keenly observed.

In April 2023, the International Monetary Fund (IMF) warned that the recent turmoil in global banking systems would slow global economic growth. In their latest Global Financial Stability Report, the IMF said the financial markets remain fragile and stressed. Whether the measures taken so far have been sufficient to fully restore confidence in markets and institutions remains to be seen. The IMF expects global economies will grow 2.8% in 2023 and 3% in 2024. Each of these forecasts has been revised down by 0.1% since January. In 2022 global economies grew by 3.4%. IMF expects global inflation of 7% in 2023, slightly down from the 8.7% achieved in 2022. Growth predicted by the IMF is the lowest in 20 years.

We remain cautious about the outlook because the rapid increase in interest rates will have a long and variable lag effect on the economy. Higher rates are still to impact the real economy fully. In addition, any tightening of credit standards (reduced lending) and increased capital costs for banks will weigh on the economy. We see risks to both bond prices (interest rates) and earnings growth (share prices).

In this environment, we remain cautiously invested and diversified and continue to hold higher-than-normal amounts in cash.

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Get your government contribution

Each year, the government offers an incentive (called a government contribution) towards your KiwiSaver account. This contribution is a small step that could help you get closer to your KiwiSaver goals. So, how can you get the maximum government contribution for KiwiSaver?

 

What is the government contribution?

This is an annual contribution made by the New Zealand government to eligible KiwiSaver members. You are typically eligible for the government contribution if you:

  • are making contributions to your KiwiSaver account,
  •  live mainly in New Zealand,
  • are aged 18 or older; and
  • do not qualify for the retirement benefit.

If you would like more information about eligibility, please click here (this link will direct you to more information on the Inland Revenue website).

You could be eligible to receive up to a maximum of $521.43 per year of government contribution. You need to contribute at least $1,042.86 to your KiwiSaver account per year to receive this amount. You can still receive some government contribution even if you cannot contribute this amount. For every dollar you contribute, the government will contribute 50 cents up to a maximum of $521.43 per year. To illustrate what this may look like, see the table below.

 

Your personal contributions Money from government
Weekly Annual Annual
Over $20 Over $1,042.86 $521.43 max
$20 $1,042.86 $521.43 max
$15 $781.14 $390.57
$10 $521.43 $260.71
$5 $260.71 $130.35

 

How do you get the maximum government contribution?

If you are an employee, your contributions will come from your salary. If your contributions from your salary fall short of $1,042.86, then you can make a voluntary contribution towards your KiwiSaver account to receive the maximum government contribution.

If you are self-employed, you can make voluntary contributions towards your KiwiSaver account.

If you want to receive the maximum government contribution, it is essential to know that the government contribution is calculated on a per-year basis (which is measured from 1 July – 30 June). This means you must ensure you have contributed $1,042.86 by 30 June to receive $521.43 in government contributions.

Getting the maximum government contribution is a helpful savings incentive. If you made sure that you received the maximum government contribution each year, you could have received over $5,000 in your KiwiSaver account of free government contributions after ten years (not taking into account any investment returns or losses). The government contribution can help you get closer to reaching your retirement savings goals.

Helping you reach your investment goals

Helping you reach your investment goals

When joining KiwiSaver, one of the most important decisions you’ll need to make is choosing which fund to invest your KiwiSaver money in. Christian KiwiSaver Scheme has three Funds you can invest in, being Growth, Balanced, and Income. Each of our Funds has different risk profiles. However, did you know you can invest in up to all three of our Funds?

 

Understanding your investment goals

Before you rethink which of our Funds to invest in, it may be important to understand your investment goals. One reason to consider this is so that you know what your appetite for risk is. For example, depending on your situation, you may prefer to invest more in our Growth Fund, which contains investments the investments industry expects to have more frequent highs and lows but over time the Growth Fund is expected to provide higher returns. Contrastingly, you may prefer a Fund that the industry considers to carry lower risk than the Growth Fund and lower expected long-term returns. Funds with this profile would be the Balanced Fund and the Income Fund for our scheme.

It can be tricky figuring out your appetite for risk, but understanding this is useful to see if your KiwiSaver is working well for you. One tool to help you understand your appetite for risk is the ‘Investor Profiler’ tool on the Sorted website. You can find that here: https://sorted.org.nz/tools/investor-profiler

This tool asks you some simple questions about your approach to your investment. Based on your answers, the tool gives you an idea of what type of investor you are and other helpful information, such as what you could expect from your investment.

 

This image is a screenshot of example graphs from the results of the Sorted Investor Profiler. The example graphs shown are of $10,000 invested over 25 years with $50 each week. These are based on a range of assumptions and thousands of simulations. Your results will vary.

 

How can you allocate your KiwiSaver across our Funds?

Have you decided that you would like to allocate portions of your KiwiSaver money across our available Funds? Then all you need to do is fill out a Change of Investment form and email it to us. The form will contain simple instructions to follow. You will also see a table where you can specify the percentage of your KiwiSaver you would like in our Funds available.

 

This image is an example from our Change of Investment form which shows you the options of where you can allocate your KiwiSaver funds.

 

Before you do fill out this form, there are just a couple of things to keep in mind:

  • Make sure that there is at least 10% in any selected Fund.
  • Make sure the percentages you choose to invest in are whole numbers.

 

To illustrate what we mean by that, here are some examples:

  • You can choose 10% of your KiwiSaver in our Growth Fund and 90% in our Balanced Fund. 
  • You cannot choose to invest only 9% of your KiwiSaver in our Growth Fund and 91% in our Balanced Fund because you need to make sure you invest at least 10% in any selected fund.
  • You cannot choose to invest 10.5% of your KiwiSaver in our Growth Fund and 89.5% in our Balanced Fund because you need to make sure the percentage you choose is a whole number. In this case, you might choose either 10% in the Growth Fund and 90% in the Balanced Fund or 11% in the Growth Fund and 89% in the Balanced Fund.
  • These examples show a 10%/90% split. You can of course choose different splits for example 25%/75%, 50%/50% across two of our Funds, or 10%/20%/70%, 20%/30%/50% across three of our Funds etc.

 

If you want to change how your KiwiSaver money is allocated across our Funds, please fill in the form here.

Once you have completed the form, please email it to admin@christiankiwisaver.nz.

This is a service that we offer right from the application process to our KiwiSaver Scheme. If you have ever wanted to split your KiwiSaver money across some or all of our Funds, this option may be for you. 

We hope Christian KiwiSaver Scheme continues to help you reach your investment goals.

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Investment Returns at 31 December 2022

Investment returns (before tax and fees)* for the quarter ending 31 December 2022 are:

Fund 3 months 1 Year (p.a.) 3 years (p.a.) 5 years (p.a.) 10 years (p.a.)
Growth Fund 2.0% -4.1% 5.8% 7.3% 8.1%
Balanced Fund 1.6% -4.5% 3.6% 5.2% 6.5%
Income Fund 0.8% -4.4% -0.3% 1.1% 2.4%

* rounded to one decimal place.

 

The final quarter of 2022 was better, despite investors questioning the strength of the economic outlook and how many more increases in interest rates might be needed to lower inflation.

However, as most people know, 2022 was not a good year overall for investors. Share markets fell, and interest rates rose strongly. Rising interest rates, which reflected inflation concerns, led to falling bond prices and therefore declines in the value of income funds.

Inflation concerns gathered steam over 2022 in the wake of the sad war in Ukraine and the lingering COVID influences. The increases in the cost of living and inflationary concerns were front and centre in most governments’ minds. The major central banks worldwide sought to fight concerns about rising living costs by raising the interest rates of securities in their control. Central bank actions, in turn, raised interest rates within their respective economies.

Where to from here? This year, barring any geo-political flare-ups, has begun with a continuation of the inflation concerns seen in 2022. Questions include, “have interest rates risen enough?” and “do current share prices correctly represent future economic activity?” We cover more detail in our Investment Outlook article for 2023, which you can read here.

We bought a small number of fixed-income securities recently, taking advantage of the better prices on offer. However, given the highly uncertain outlook, we remain cautiously invested and diversified and continue holding higher-than-normal cash amounts.

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Investment Outlook for 2023

The same main themes that applied in 2022 will again dominate in 2023. Those key themes revolve around the outlook for inflation, interest rates and growth. These are common every year but are particularly of concern at present.

Central banks have reversed their growth-enhancing policies. Interest rates rose significantly in 2022 and negatively impacted share prices. We believe interest rates will have a significant bearing on future returns. Will interest rates rise further this year? It is widely acknowledged that earlier interest rate rises have a delayed impact on the economy. Exactly how long the delay is and how deep the impact is varies depending on the area of the economy, e.g. mortgages, borrowing, business investment, consumer spending etc. There is still a lot of uncertainty about how labour shortages will affect the outcome. The fear is that labour shortages will result in wage growth, leading to higher inflation. These and other factors should determine how fast inflation numbers come down. Any geo-political developments could also surprise.

The World Bank has revised its 2023 economic forecasts. It was, in January 2023, expecting global economic growth of just 1.7% this year. If its predictions are accurate, that will put economic growth in 2023 at its third lowest level in the past three decades, behind 2009 (Global Financial Crisis) and 2020 (COVID-19).

There is little doubt, though, that whatever eventuates, the markets could fluctuate wildly at times. Rest assured, as we have mentioned previously, we are doing our best in these times of heightened uncertainty to look after our members’ interests. The portfolios remain diverse, and we focus on investments that we believe are more at the quality end of the spectrum.

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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.