SuperLife

Welcome

Welcome to the March quarter news.

We are delighted to report that in a recent Consumer KiwiSaver satisfaction survey, SuperLife achieved a top three place for overall customer satisfaction. This put us ahead of three of the biggest KiwiSaver schemes and default providers who recorded below average satisfaction scores.

We were rated above average for keeping customers up-to-date and timely responses to inquiries. Our members were more likely to know what fees they are paying and how their investments were performing relative to members of other schemes.  They had the highest percentage who felt they had access to sufficient independent information and advice to confidently make decisions regarding their KiwiSaver investment. We continually look for ways we can support you better.  Please call or email us if you have suggestions on how we can do better.  We’re here to listen.

This quarter we have an update on market activity where markets have rallied strongly across all asset classes.

In our section on Socially Responsible Investing and the Power of Engagement, we advise that SmartShares has joined other large investors to engage with Facebook, Google and Twitter to invest more in monitoring and excluding violent and extremist content.

We include details of the changes to the KiwiSaver rules in 2019.  You can now choose to contribute 3%, 4%, 6%, 8% or 10%. Our article on “should you increase your KiwiSaver contribution”’ gives some insight on whether it’s a good idea to increase your KiwiSaver savings or would you be better increasing your savings in a lower cost, non-KiwiSaver scheme like our SuperLife Invest scheme.

See how your own investment strategy has performed:

• View each of our funds and their performance
• Login to the website

Our regular My Future Strategy update reminds us that it is important not to be spooked by the market volatility. Time and time again, history suggests that markets recover from periods of weakness. Read more

• SuperLife changes 2019
• Check your PIR (prescribed investor rate)
• Check how to get the maximum government contribution (previously called MTC)
• SuperLife investment seminars 2019
• New NZ Super rates

Market Update

Market commentary

Markets have rallied strongly so far this year across all asset classes. This rally has largely erased the paper losses investors experienced in December 2018, and some markets, including the NZ equity market, are now on an all-time high (see the figure below).

S&P/NZX All Cap Total Returns Index, starting value = 100 in December 1992.

In our last update, we emphasised that the sell-off did not necessarily herald that tough times were ahead. The bounce back in markets so far this year has reflected this view.  Downside risks have become less of a concern. We think there were three more specific catalysts for the recovery. Firstly, central banks (including in the US and New Zealand) changing their minds on the need for as large future interest rate increases. Secondly, the Trump administration kicking for touch threatened tariff increases on Chinese goods. Thirdly, a view that markets had become good value following the sell-off.

International equities

The international developed market increased by around 11% over the quarter, implying a 9.3% return for the year ended March 2019 (FTSE Developed All Cap Index in NZ dollar terms). NZD hedged equity returns were also strong, returning 12.7% for the March quarter.

Emerging markets

Emerging market equities returned around 8.5% in the quarter (FTSE Emerging Markets All Cap Index). However, this bounce still leaves these markets with a slightly negative return over the year (around -1.5%), reflecting that they’ve borne the brunt of the slow-down in global trade over 2018 and the trade-war fears.

Trans-Tasman equities

Trans-Tasman equity markets also enjoyed a strong quarter. Australian shares returned 10.7% in the March quarter and 11.5% over the year (S&P/ASX 200 Index). New Zealand shares returned 11% in the quarter and 18.5% over the year to March 2019 – a very strong performance both in absolute terms and compared to offshore equity markets (S&P/NZX NZ 50 Index).

Bonds

In recent quarters, we’ve seen bonds suffering relatively poor returns when equities have done well and vice-versa. This quarter, monetary policy easing led to both bonds and equities performing well. Global bonds returned 4% in the quarter and 4.8% in the year to March 2019 (Bloomberg Barclays Global Corporate Bond Index). New Zealand investment grade bonds returned 2.3% for the quarter and around 6% for the year.

Given the strong performance of markets, SuperLife Fund returns were positive across the board in both the quarter and over the year to March. SuperLife Income, which has no exposure to equities, had a positive return of around 4% over the quarter and 5.2% over the year (after tax and fees). The SuperLife Balanced fund returned 8.2% in the quarter and 7.5% over the year. The SuperLife High Growth fund, which largely invests in equities and property stocks, increased 11.5% in the quarter and 8.1% over the year.

Socially Responsible Investing and the power of engagement

The notion that Facebook and other social media providers (e.g. YouTube which is owned by Google) need not take responsibility for what is broadcast on their platforms was shattered following the Christchurch tragedy. There is a growing chorus in New Zealand and offshore to bring them under the same standards that other broadcast media (radio and television) must comply with to maintain their licence to operate.

New Zealand’s institutional investor community, of which we are a part, has taken these concerns extremely seriously. Smartshares (the owner of SuperLife) has joined large investors like the NZ Superfund and ACC, and an increasing number of global investors, to formally engage with Facebook, Google and Twitter. 

Our aim is to encourage those platforms to invest more in monitoring and excluding violent and extremist content.

My Future Strategy

As discussed in the last update, it’s important not to be spooked by market volatility. Time and time again, history suggests markets recover from periods of weakness. The risk of permanent capital loss over the long term is minimal given this pattern, and because SuperLife funds are broadly diversified.

For investors with long-term horizons, staying the course with your present investment strategy is usually the best option, subject to your goals, objectives and cash needs remaining broadly the same as when your strategy was established.

Investors concerned with performance over a medium-term horizon (the next three to five years or so) may see an opportunity to enhance returns by tweaking your allocation to cash, bonds, equities and property stocks as follows:

• Holding less in bonds and, therefore, more cash and shares. This reflects the view that equity markets offer better value, while there is risk that interest rates may increase for bonds more quickly than is currently factored into bond prices.
• Favouring value, emerging market, Australian and European equities compared to US and NZ equities. These latter markets are broadly assessed to offer less value (upside return potential) than other markets.
• Maintaining holdings of property stocks at around your longer-term allocation.
• Maintaining the currency hedge on overseas shares at around your longer-term allocation. Our interest rates are still slightly higher than foreign rates on a global market capitalisation (e.g. MSCI World Index) basis. This means hedging global equities will still earn investors a positive “carry”.

This strategy strategy does not constitute financial advice and doesn’t take account of personal circumstances; rather it is designed to illustrate possibilities. As with all investment decisions, what might be the right strategy over the medium or longer-term may not pay off over the very short-term. No one can consistently predict what’ll happen over the short-term.