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  • The Investment Environment: Locking in 2019 Returns

    28th August, 2019
  • The Investment Environment has Changed

    James Grigor, Chief Investment Officer, NZ Funds, has produced a report on the changed investment environment. Grigor notes that growth is slowing, geopolitical unrest is increasing and NZ Funds has transitioned clients’ portfolios to a more defensive footing in anticipation of a pullback in global share markets. NZ Funds has decreased risk across the Growth and Inflation Categories, locking in the strong gains generated this year.

    The main points in Grigor’s report are:

    Market View / Increased Volatility

    Global economic growth is slowing and as interest rates drop volatility has increased. The triggers are geopolitical, such as the ongoing US-China trade war, Brexit, Increased tension in the Gulf and South China Sea and protests in Hong Kong. While NZ Funds anticipates a share market pullback, a recession is not a forgone conclusion. Over the medium to long term NZ Funds still expects shares and other growth assets to provide better returns than term deposits.

    Portfolio Changes

    NZ Funds has taken a defensive position, locking in the strong returns generated in the Growth and Inflation categories this year. The managers have implemented three defensive measures: firstly, exposure to global and Australasian share markets has been reduced by 15%. Secondly, NZ Funds has invested in gold, a safe haven, that is expected to perform positively during a global share market retreat. Thirdly, NZ Funds’ downside mitigation manager, Universa, will provide protection should markets suffer a pullback greater than 20%.

    What if Markets Recover?

    If predictions are incorrect and markets continue to grind higher, clients will continue to participate in an appreciating share market. With no new information NZ Funds will remain defensively positioned, however if there is a major positive catalyst, the defensive position will be closed out promptly and clients’ exposure to risk assets increased.

    NZ Funds is committed to its core job of tracking global share market indices over time while generating sustained incremental returns for clients.

    If you are interested in reading more of this report, including some scenario analysis showing how portfolios could perform in a downturn, give us a call on 03 578 1921 (Blenheim) or 03 545 8029 (Nelson).