Investment Performance

You have probably noted that your savings with us have rebounded strongly over the past 6 months, but you may ask what has been driving this welcome turn around (especially against the backdrop of a looming recession, rampant inflation, and rising interest rates).

While you have benefited from the broader market upswing, we have taken strategic positions within the Lifestages KiwiSaver Scheme that have positively impacted your investment returns, such as:

• Directly holding larger companies such as Apple, Microsoft and Alphabet (Google), as the market saw a flight to these large companies as uncertainty grew;
• Favouring Information Technology and Communication Services companies which were the best performing sectors for six months, up 28% and 22% respectively;
• Favouring companies at the forefront of their industries with high degrees of pricing power, such as Fisher and Paykel Healthcare and EBOS in the healthcare space here in New Zealand, who have performed extremely well over the period.

Additionally, the fixed interest component of the Scheme is now generating income at over 5% per annum thanks to central banks having risen rates substantially over the period.

Despite the better performance over the past 6 months, global markets are not calm just yet. Cracks are starting to appear from the tightening monetary policy, and the elephant in the room over the past few weeks has been the ongoing situation concerning the US and European banking sectors. Following the shock waves from the demise of Silicon Valley Bank, Signature Bank and Credit Suisse, the last six months overall have been characterised by persistent high inflation and the corresponding rate hikes.

What's Ahead?

Looking ahead, it is very unlikely to see shares or fixed interest face the same pressure in 2023 as they did in 2022. However, we are yest to see the full, impact on RBNZ and other central bank's rate hikes though the economy and inflation is still not under control. In times of uncertainty such as now, we believe it is important not to lose sight of long-term investment opportunities that can benefit your portfolio.

We believe this is best achieved through active selection with an emphasis on investments in companies that demonstrate "quality" characteristics, focusing on a few key themes which we believe are poised to do well going forward.

For example, Healthcare was a favoured sector last year and remains so today. Company earnings in the healthcare sector have historically proven to be recession resilient, and we would expect that precedent to hold in the next recession. 

This is important in a year in which stock performance is more likely to be driven by company earnings rather than overall market sentiment improving. Healthcare also boasts a long-term tailwind as aging populations, healthcare innovation and increasing health-related needs worldwide set the stage for attractive growth prospects across the sector.