We promised to report back to you following our recent attendance at the bi-annual Adviser Investment Day in Auckland. Our investment manager NZ Funds Management Ltd hosts these events for the Authorised Financial Advisers it works with around the country.
Lee and I also use these days to meet our obligations towards our Continuing Professional Development.
NZ Funds’ Chief Investment Officer (CIO) Michael Lang has recently returned from a global funds manager conference in Hong Kong and as expected he spoke about the slowing growth rate of the Chinese economy, which has been slowing for a number of years now. How fast this is occurring no one outside of China knows.
NZ Funds’ view is that China needs to devalue its currency or tough out a recession. With China now integrated into the world’s trading system, whatever happens next in China will be felt by all.
Another topic was oil prices. Global share markets have been tracking the collapsing price of oil. Over the past 12 months oil has fallen 38% driven by weak demand and excess supply.
There are also signs of a decline in company profits in the United States. At the same time the central bank (the Federal Reserve) has decided to raise interest rates, which will slow the economy and put further downward pressure on company profits. Nevertheless certain sectors continue to grow, and there is evidence that the US economy is continuing to grow.
Staying the course.
Despite the concerns there are a number of reasons to feel comforted, especially as you have been working with an Authorised Financial Adviser and are using our LifeCycle aged based asset allocation approach in your KiwiSaver.
Our top 5 reasons are:
- Our portfolios are widely diversified
- Our portfolios are actively managed by global experts
- Our clients own few emerging market assets
- Our client portfolios have downside mitigation strategies
- You have a plan – stick to it.
Despite the more challenging environment nothing fundamentally has really changed. Our collective focus remains on ensuring that each of our clients holds a well diversified and actively managed portfolio of quality assets, matched to an up-to-date financial plan.
History tells us that in the long-run, equity markets will do just fine. In the short-run, however, the prospect of losses can create a lot of havoc.
If you would like to revisit your plan to ensure that it remains appropriate to your situation and tolerance to risk we would love to hear from you.