Report on investment performance for the quarter ended 30 June 2020

What a difference a quarter makes

In stark contrast to the March quarter, which produced one of the worst quarterly returns for our multi-asset class funds, the June quarter produced one of the best. The sharp change in fortunes was due to a combination of improving news on the COVID-19 virus plus unprecedented actions by policymakers to try and offset the damaging effect of the lockdown. 

The performance of the MAS funds for the quarter are shown in the charts below. 

*Returns are after total annual fund charges and before tax.

The strong quarter has lifted the Funds' performance back into positive territory for the year ended 30 June 2020. 

*Returns are after total annual fund charges and before tax. 

The willingness of global share markets to look past the short-term damage caused by COVID-19 suggests the crisis is viewed as a one-off event rather than a sign of deeper problems with the world economy, as was the case with the Global Financial Crisis of 2007-09. Consequently, there is more confidence that the pandemic will end and the economy will bounce back at some point when detection, tracing, treatment and prevention measures are developed to "flatten the curve".

The long-term view of financial markets was helped in no small part by the enormous stimulus provided by policymakers. With official cash rates in many countries reduced to virtually zero, a more positive strategy by investors was one colloquially referred to as TINA – There Is No Alternative. In other words, being defensive and holding cash gave no return, whereas investing in shares offered at least the potential for dividend income and capital gain. 

The power of the TINA effect was evident late in the quarter where there was little adverse reaction from sharemarkets to worsening COVID-19 statistics internationally. In fact, the key US sharemarket index (the S&P500) closed the quarter down only about 8% from its pre-COVID-19 all-time high. 

Despite the substantial recovery in share prices since March, the continued risk of further flare-ups of the pandemic means our investment manager JBWere is taking a cautious approach. The funds are holding a lower allocation to shares than usual and instead holding more cash, given the continued risks facing global sharemarkets. JBWere plans to use any significant weakness in share prices as an opportunity to move from cash back into shares. 

You can learn more here about JBWere's investment outlook. 

Responsible investing strategy provides strong returns

We have a responsible investing strategy because it's the right thing to do but there's increasing evidence that it makes sound business sense as well. 

The most meaningful way to measure the success of the MAS responsible investing strategy is to examine the performance of the core international shares component of our funds. Not only does this portfolio exclude many fossil fuel related companies – nearly 7% of the broad market – it favours companies which are leaders in their environmental, social and governance (ESG) practices. The outcome of this strategy is illustrated in the chart below. 

Notes:

Returns are based on the MAS KiwiSaver Balanced Fund and before the impact of foreign currency hedging.
Returns are before fees and tax. 
Benchmark is the MSCI All Countries World Index (ex-NZ), in NZ Dollars.
Inception is 1 October 2017.

So not only are Members investing in a way that makes a better, positive contribution to the environment and human health, they are enjoying better returns as a result. Learn more here about the MAS responsible investing strategy. 

We can help

Recent events reinforce the importance of having a sound investment strategy and sticking to it. To help you formulate your own investment strategy, speak to a MAS adviser. Our advisers aren't paid any commissions so you can be sure they have your best interests at heart. To arrange an online or phone meeting, complete this contact form and we'll be in touch.

It's also important to make sure you're in the right Fund for your risk appetite. You can use our online risk profiler questionnaire to see if you're in the right fund for your circumstances. 

If you decide to change your investment strategy after reviewing your risk profile or meeting an adviser, you will need to complete an investment strategy change request form for KiwiSaver and/or Retirements Savings Plan.

There is no fee for switching. 

Once you are comfortable with your investment strategy, you can see weekly updates on fund unit prices and returns, on our website for KiwiSaver and Retirement Savings Plan.