2018 8 SuperLife Investment Semin inar Hugh Stevens Debbie Cundy Tim Rentzios
Dis isclosure › Smartshares Limited (’Smartshares’), a wholly owned subsidiary of NZX Limited (’NZX’), is the manager of the SuperLife KiwiSaver scheme, SuperLife workplace savings scheme, SuperLife UK pension transfer scheme and SuperLife Invest (‘Schemes’). While care has been taken to supply information that is accurate, none of Smartshares, NZX, any of their related companies, their directors or any other person guarantees the Schemes, any investment in the Schemes, or any returns on an investment in the Schemes, or gives any warranty of reliability or accuracy, or accepts any responsibility arising in any way including from any error or omission. Past performance is not indicative of future performance and is not guaranteed by any party. Returns over different periods may differ For further information, please download the product disclosure statement for the schemes by visiting super erlife.co co.nz/res esource ces/leg egal- do docum ument nts
Welc lcome
Agenda nda › Meet the SuperLife team › Market update › How your funds have performed › Investing in periods of uncertainty › Make use of our tools, we’re here to help
Super uperLife, e, m managed ed by by Smartshares es L Limited ed The he Smartsha hares boa board d of of five di director ors Paul Baldw dwin Guy Ellif lliffe Mark rk Peterson son John W ohn Wil illiams Lindsa ndsay Wri right ght Chairman Independent Director Independent Director Director Director Signi gnificant nt industry ex exper erien ence e that i incl cludes es: ACC, ANZ Investments, BNY Mellon Investment Management, NZX Wealth Technology, Russell Investments, Vanguard
Owne ned b d by NZX, New Zealand’ d’s E Excha hange nge › Established 1860s › Owner of Smartshares, Manager of SuperLife › Market operator and regulator › Globally connected exchange
Mana nagement nt CEO, Smartsh shar ares s Limited › Extensive funds management (product and governance) experience › Previously Head of Private Equity and Real Estate Fund Services, BNP Paribas Hugh ugh Stevens › JP Morgan Inve vestment c consultant › Significant expertise in asset allocation › Associate of the NZIER › NZ Institute of Pacific Research Aaron ron Dre rew › Previously NZ Super Fund, RBNZ, OECD (Paris) MyFiduciary
Mar arket Up Updat ate
The he pa pace of e of gr grow owth r remains st strong › Despite tariffs, US GDP growth very strong and global growth (around 3.8%) remains above its long term trend (around 3.5%) › NZ GDP (June quarter) twice the pace expected by the Reserve Bank › NZ business confidence has fallen since the election, but Source: World Bank, Haver Analytics, DB Global Research growth outlook still favourable
Not ot a a gi given ven tha hat rates es w will be be c cut ut › Markets backed down from the view the RBNZ may need to cut future interest rates given stronger GDP growth and rising inflation › The rate of decline for the NZD against the USD has slowed Source: Statistics NZ
NZ inf nflation expec xpectations ba back on on target et › RBNZ target range is 1% - 3% on average over the medium term Source: Statistics NZ
US short term r rat ates le lead ad t the p pac ack › US cash rate is now 2.25%, well over the NZ 1.75% overnight cash rate › US cash rates being higher is quite unusual (not seen since Dec 2000) -typically NZ overnight cash rates are at least 1% higher than the US Source: Statistics NZ, Haver Analytics
Cur Curren ency he hedging › Currency hedging is the decision to reduce or eliminate a fund’s exposure to changes in an exchange rate › There are two benefits 1. Short term -reducing volatility 2. Long term -benefiting from the difference between NZ and offshore interest relates
Currenc ncy h y hedgi dging g – what’s c change nged? d? › When NZ rates are above offshore rates there is a long term positive benefit – we call this difference ‘carry’ › Although NZ rates are lower than US short term rates, carry is still positive due to the difference in rates with Europe, UK and Japan Thi his ov overall pos positive carry argues for or maintaining ng a hi high gh level of of cur urrency he hedg dging
Cur Curren ency he hedging i in t n the he S Super uperLife f e fun unds › Fully hedged: Overseas bonds › 75% hedging: Developed market equities › Unhedged: Everything else Hedgi dging ng at thi his l level he helps ps t to o mini nimise ov overall por portfol olio o risks
Equit ity m marke kets › Decline in the NZD has flattered the returns from offshore equities and property (where held on an unhedged basis) Mark rket Develo lope ped Interna natio iona nal l Equities Emerging ing Market Equit itie ies New w Zealand Equit ities Index MSCI World ex Australia MSCI Emerging Markets S&P/NZX 50 Index Quarter to September 2018 • Returns in base currency 5.1% 1% (1. (1.1%) • Returns in NZD (unhedged) 7.4% 4% 1.0% 0% 4.6% 6% • Returns in NZD (hedged) 5.7% 7% N/A /A 1 Year to September 201 2018 • Returns in base currency 11. 11.5% (0. (0.8%) • Returns in NZD (unhedged) 21. 21.5% 8.2% 2% 17. 17.9% • Returns in NZD (hedged) 13. 13.3% N/A /A Source: Morningstar Direct, MyFiduciary calculations for NZD hedged exposure
Propert rty m mark rkets › NZ real estate investment trusts (REITs) outperformed Australian and Global REITs in the most recent quarter REITs Ts New Ze Zeal aland Australia lia Globa bal Inde ndex (exclude udes tax and d fees ees) FTSE EPRA Nareit NZ S&P/ASX 300 A- REIT FTSE EPRA/NAREIT Global Quarter er to Sep eptem ember er 2018 • Returns in NZD 4. 4.6% 6% 2. 2.0% 0% 1. 1.8% 8% 1 1 Year to September er 2018 2018 • Returns in NZD 9. 9.0% 0% 13. 13.9% 9% 13. 13.0% 0% Source: Morningstar Direct Supe uperLife Prop roperty Fund und re retur urne ned 9.5% % (after fund und charge ges and nd taxes) s) for r the year r ended d Sep eptem ember er 2018 2018
Bonds ds › NZ bonds continue to offer a premium over short- term cash rates and term deposits › The soft annual return on global bonds reflects long- term interest rates increasing at a faster pace than what had been expected, particularly in the US › This ‘mark to market’ impact does not reflect any defaults in loan payments by bond issuers › Global bond yields are now higher, implying higher future returns Supe uperLife’s NZ Bonds onds Fund und retur urned d 3.5 .5% and nd Ov Overseas Bonds onds Fund und returne ned 0.9 .9% (after r fund und cha harges a and nd taxes) s) for r the year e ende nded d September 2 2018
Socially r responsible i investing ( (SRI) I) › Vast majority of listed wealth in New Zealand now incorporates SRI strategies 2016 R Respo ponsib ible le 2017 R Respo ponsib ible le Respon onsible ble Investment Approach Invest stmen ment FUM Invest stmen ment FUM % Change Screening (including negative, positive, 42.3 85.9 103% best in class and norms-based screening) Sustainability themed investing 0.4 0.4 4% 4% Impact investing and community finance 0.1 0.1 0% 0% Core responsible investment total 42. 42.8 86. 86.4% 102 102% Broad responsible investment total ESG 88. 88.6 97. 97.0% 9% 9% integration Total responsible investment 131 131.4 183 183.4 40% 40% Source: RIAA 2018
The K KiwiSaver socially responsible continuum No SRI Some SRI Exclus usion ions Comprehensive SRI Exclu lusions Ful ull ESG Int ntegration ANZ KiwiSaver Scheme ASB KiwiSaver Scheme Exclusions of cluster munitions Booster KiwiSaver Aon Russell KiwiSaver AMP KiwiSaver LS BNZ KiwiSaver Kiwi Wealth KiwiSaver Exclusions of cluster munitions, Mercer KiwiSaver tobacco and a limited number of Milford KiwiSaver other sectors Summer Investment Selection Westpac KiwiSaver Exclusions of cluster munitions, tobacco and in some Simplicity KiwiSaver cases gambling and thermal coal Exc xclus usions ons do do not not Fisher TWO KiwiSaver Scheme typi pically y extend nd to fixe xed d incom ome Exclu lusio ions acro ross equit itie ies Standard SuperLife Funds and d most fixe xed d incom ome Exclus usions ons & ESG AMP KiwiSaver AMP Resp Invmt Bal integr gration on acros oss most Booster KiwiSaver Socially Rsp Inv Bal of of the he por portfolio SuperLife Ethica Source: Based from publicly disclosed Responsible Investment Policies and Morningstar holdings data
To s summarise › The pace of growth remains strong › We maintain our currency hedging position › The equity markets have had a strong run however valuations are not at the elevated levels experienced before previous market corrections › Bonds have been impacted by unexpectedly fast rate rises, particularly in the US › Socially responsible investment is fast becoming mainstream
SuperLife fund performance
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