Giving you the highlights from the last three months at Smartshares and the markets
In this issue
From Anna’s desk:
The value of investor education and lifelong learning
Fund Spotlight:
A simple way to invest in global and local property companies
What’s New:
The ‘magic number’ for KiwiSaver members
Quarterly Highlights:
Is a new KiwiSaver default rate on the horizon?
The Stocktake:
Global equity markets start slow and end strong
Kia ora koutou,
At my children’s schools they talk about being lifelong learners, and I think it’s a timely reminder for us all. We never have complete knowledge, and this is particularly true in our world of investing. Ongoing learning and educational support is the theme of my introductory welcome this quarter, as we are committed to growing this aspect of our service and helping New Zealanders make wise investments.
You’ve spoken and we’ve listened
When we reached out to our investors for feedback, a common theme was wanting more useful content to guide you through all stages of your investment journey. So over the next few months, you’ll start to see more investment guides and articles, to help you make more informed financial decisions. Whether you’ve already retired and are enjoying the hard-won fruits of your labour, or you’re starting out with a little spare cash and a vision for your financial future, we’re here to support you.
Partnering with the New Zealand Cricket Players Association
Our long-standing relationship with NZCPA started in 2015, when we proudly began serving as their superannuation provider. We’re building on that relationship, as you might have seen on our social channels (or the NZCPA’s, if you’re a cricket fan). We will now also offer financial education and support to help NZCPA’s talented cricket players realise their future aspirations and become more knowledgeable about their workplace savings, KiwiSaver and investment options.
Engaging with our investors across the country
It's both a pleasure and a priority for us to spend time with our investors on the ground. Over this past quarter, our Client Development team has been busy, visiting 23 of our workplace savings clients across the country to discuss how they can make the most of their SuperLife funds. We held informative sessions in a range of formats, including group presentations and one-on-one discussions. These sessions mainly focused on the value of engaging with and being responsible for your retirement savings, learning how to navigate retirement, and the small steps that can be taken to improve your overall outcome.
Celebrating 5 years with Ka Uruora
On June 17th, we celebrated the 5-year anniversary of the Ka Uruora WhānauSaver plan. The plan has grown from two to six participating iwi, with more than 900 members in total. Four more iwi are set to join by the end of this year, and we look forward to welcoming them to the SuperLife community.
As we look ahead to the second half of the year, there’s plenty to be excited about – and we’ll be sure to keep you posted, every step of the way.
Ngā mihi nui,
Anna Scott - CEO, Smartshares
Fund spotlight
Global Property Fund
Property is a solid foundation for any investment portfolio, and a property fund offers greater diversification, affordability and liquidity than a direct property investment. Our Global Property Fund is a great option for anyone looking to invest in a broad spectrum of local and global property companies.
The fund mainly invests in the Vanguard International Property Securities Index Fund, the Smartshares Australian Property ETF and the Smartshares NZ Property ETF.
Learn more about this fund and its performance here
The SuperLife schemes are issued by Smartshares Limited. The product disclosure statements are available at superlife.co.nz/legal.
What’s new?
The magic number
As many of our members know, every year, the government contributes 1 dollar to every KiwiSaver account for every 2 dollars saved – up to a maximum contribution amount of $521.43. Anyone who is eligible and contributed at least $1042.86 to their KiwiSaver account between July 1 last year and June 30 this year will have received the maximum contribution from the government.
But KiwiSaver members who missed out on it this year can still set themselves up to receive it next year, by contributing regularly over the next 12 months and keeping the ‘magic number’ in mind: $1042.86.
Investors who fall short of the ‘magic number’ are still eligible for a dollar of government contribution for every 2 dollars they’ve saved. So it’s worth adding to your KiwiSaver account over time, even if it’s only in small amounts.
Don’t forget to check your PIR!
Every year, IRD assesses your income and adjusts your prescribed investor rate (PIR). IRD will notify you about your PIR, and then you might need to adjust it in the SuperLife member portal. If you haven’t registered for the online member portal, you can register here.
It’s important to check that you're using the correct PIR, to avoid a future tax bill or overpaying tax.
You can find more information in our handy PIR tax rate guide.
Quarterly Highlights
Is a new KiwiSaver default rate on the horizon?
The Retirement Commission recently released a paper titled ‘KiwiSaver Opportunities for Improvement’, identifying changes that could be made to improve outcomes for KiwiSaver members. One of their key recommendations is to raise the default KiwiSaver contribution rate and default employer match from 3% to 4%, while keeping 3% as the minimum contribution rate.
Modeling by Melville Jessup Weaver found that this change could result in significant increases in how long KiwiSaver funds would last post-retirement. For median income earners, the move to 4% could see KiwiSaver funds last for approximately 20 years for men and 30 years for women – compared to 15 years for men and 25 years for women, at the current rate.
Similarly, for high-income earners, KiwiSaver funds could last 25 years for men and 40 years for women, up from 20 years for men and 30 years for women. For low-income earners, the bump could be even more dramatic: they could see their KiwiSaver funds last 25 years for men and 60 years for women, up from 20 years for men and 45 years for women.
Although the recommendation is still just a proposal, we’ll keep an eye out for any developments and inform you if there are any concrete changes.
Getting the right people in place to support our growth
On a people and culture note, we recently welcomed our GM of Business Development and Distribution, Catherine Pollock. Catherine brings with her a wealth of experience in building and developing long term relationships with direct investors, intermediaries and advisers, which will be invaluable to us in building a stronger service offering for our investors.
We’ve also welcomed a new Head of Investor Education, Cameron Watson. He previously served as Head of Research at Craigs for 14 years and comes to us with an ideal blend of financial expertise and experience. He will help us provide more in-depth guidance to our investors, by creating articles and reports that explain complex topics and new developments in the world of investing.
The Stocktake
Overview
After a rocky start, confidence returned to global equity markets later in the quarter and ended the three-month period on a positive note. The market initially interpreted the strong economic data to mean interest rates would remain higher for longer than expected. The timing of interest rate cuts remained a key focus over the quarter and the primary driver of market sentiment. Both the market and the Federal Reserve are indicating just one rate cut this year, which is reasonable in our view.
In January, the market was expecting six rate cuts over 2024, by March this had halved to three, and by the end of June this had reduced to just one rate cut being expected before the end of the year. In June, the Federal Open Market Committee (FOMC) decided to keep rates on hold, as expected, and continued to wait for further confirmation that inflation is under control. The latest US price indicator shows May core PCE inflation rising by 2.6% year-on-year, the lowest increase in over three years.
Overall, NZ equities fared worse than their global counterparts. The S&P NZX50 Index decreased slightly more than 3.0% over the June quarter. The number of companies with negative returns outnumbered those with positive returns 2-to-1 as tight monetary policy continues to apply pressure to the economy. Gentrack and Vista Group were the strongest performing companies up 21.6% and 13.3% respectively.
Economic data continues to support a soft landing for the world’s largest economy, with encouraging US inflation prints across all three months. Global equities continued to trend higher, quickly recovering from a small dip in April and paving the way for several major stock indices to report new record highs. Risk appetite increased as the quarter progressed, and the New Zealand Dollar increased almost 2% from 0.5980 to 0.6092 against the USD. This increase in the NZD means that currency hedging added value over this period and that hedged funds outperformed their unhedged counterparts.
Finance in full
World indices at a glance
| EQUITIES | Q2 2024 RETURN | 1 YEAR RETURN | 3 YEARS (P.A) RETURN |
|---|---|---|---|
| International | |||
| FTSE Developed All Cap Index | 2.3% | 19.8% | 6.3% |
| FTSE Emerging Markets All Cap China A Inclusion Index | 5.2% | 13.0% | -3.4% |
| S&P 500 Index | 4.7% | 25.1% | 10.2% |
| Australasian | |||
| S&P/NZX 50 Gross Index | -3,2% | -1.7% | -2.5% |
| S&P/ASX 200 Index | -1.2% | 12.0% | 6.3% |
| FIXED INTEREST | Q2 2024 RETURN | 1 YEAR RETURN | 3 YEARS (P.A) RETURN |
|---|---|---|---|
| International | |||
| Bloomberg Global-Aggregate Index | -0.9% | 1.1% | -5.4% |
| US 10-year government bond yield (%) | 4.3% | 4.2% | 3.8% |
| New Zealand | |||
| S&P/NZX A-Grade Corporate Bond Total Return Index |
1.2% | 6.3% | 0.3% |
| NZ 10-year government bond yield (%) | 4.7% | 4.5% | 4.6% |
(Data source: Bloomberg, compiled by SuperLife)
Global assets: major market movements over the last 12 months
(Source: Bloomberg)
SuperLife KiwiSaver Diversified Funds as at 30 June 2024
The investment returns shown below are for the specified periods ended 30 June 2024, for a SuperLife KiwiSaver Scheme member (after fund charges and tax). The SuperLife Default Fund is only available to members of the SuperLife KiwiSaver Scheme.
| FUNDS | 3 MONTHS | 6 MONTHS | 1 YEAR | 3 YEARS (P.A) | 5 YEARS (P.A) | 7 YEARS (P.A) |
|---|---|---|---|---|---|---|
| Income | 0.51% | 0.12% | 2.99% | -0.92% | 0.20% | 1.07% |
| Conservative | 0.38% | 2.65% | 6.1% | 0.70% | 2.28% | 3.05% |
| Balanced | 0.05% | 4.61% | 8.14% | 1.71% | 4.18% | 4.76% |
| Ethica | 0.41% | 4.29% | 8.94% | 1.75% | 5.41% | 5.58% |
| Default | 0.51% | 5.27% | 8.94% | - | - | - |
| Growth | 0.22% | 6.27% | 10.05% | 2.6% | 5.3% | 5.82% |
| High Growth | -0.12% | 7.62% | 11.57% | 3.38% | 6.43% | 6.89% |
(Note: These figures are representative of the SuperLife KiwiSaver Scheme. Returns displayed account for fund charges and tax at 28%, but your tax rate may be lower. Past returns are not a reliable indicator of future performance.)
This information does not constitute financial advice and does not 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 will happen over the short term. Those acting upon the information in this newsletter do so entirely at their own risk. Smartshares does not accept liability for the results of any actions taken or not taken based on this information. While every effort has been made to ensure accuracy, no liability is accepted for errors or omissions in this newsletter.
