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August 2014 Newsletter

Carmel Fisher

There is a saying that any publicity is good publicity. This was certainly put to the test last month as Fisher Funds found itself wrongly portrayed on national TV in a story about a serious illness withdrawal. While the story inaccurately presented our involvement and response and was sensationalised, what is most important is that the right result was achieved for the member concerned. We have dedicated an entire section of this newsletter to early withdrawals from your KiwiSaver account. We know that it is not pleasant to seek an early withdrawal for financial hardship or serious illness - we do want to make the process as straightforward as possible and we are here to help. You can also watch our response to the Campbell Live story here.

Carmel Fisher
Managing Director | Fisher Funds


Team Talk

Has the NZ share market peaked? Zoie Regan shares our thoughts.

Watch video

At a Glance

As at 31 July 2014

Unit Prices ($)
Preservation Fund $2,603.5240
Conservative Fund $1.4621
Balanced Fund $3,836.6213
Growth Fund $1.3248
Equity Fund $3,267.9645
Cash Enhanced Fund $1.4117
 
Net Performance (July 2014)
Preservation Fund + 0.3%
Conservative Fund + 0.3%
Balanced Fund + 0.2%
Growth Fund + 0.1%
Equity Fund + 0.1%
Cash Enhanced Fund + 0.4%

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Investment Commentary

Investment commentaryYou could be forgiven for looking at the returns for July and thinking obviously not a lot happened in markets during the month. However, that was not the case with lots of interesting developments for investors to take on board.

In New Zealand, the Reserve Bank raised interest rates for the fourth time this year and indicated that it would likely pause for the rest of the year to assess the impact on domestic growth. Global dairy trade auction prices continued to fall and Fonterra further cut the proposed payout for farmers. Both actions contributed to the New Zealand dollar falling which was music to the ears of exporters.

On the portfolio front, the Kathmandu share price rebounded from its fall in June as the late arriving colder weather drove shoppers to update their wardrobes. This late surge in sales will see the company deliver profit in the region it had previously forecast. In last month's newsletter we wrote about how we take account of weather patterns in deciding the size of our Kathmandu holding in the portfolio.

The New Zealand share market has performed strongly for quite some time now and many investors are asking us where to from here. Zoie Regan shares our thoughts in this month's investing commentary. Watch here.

Internationally there were a series of fairly positive economic releases including:

  • Chinese second quarter GDP surprised positively, largely in response to stimulative measures by the Chinese authorities
  • US second quarter GDP grew ahead of expectations
  • US employment cost index continued to improve meaning that wages continue to rise, now up 2% in the year to June.

However, continued geopolitical tensions in Ukraine and the Middle East, the reining in of US monetary policy (actually a good thing as its means the US economy can stand on its own two feet) and the prospect of rising interest rates saw a sharp selloff in share markets at month end.

Our international share holdings were not immune with our US shares in particular underperforming. Stock selection within the US consumer discretionary sector as well as our overweight to the utilities sector were the main contributors to the underperformance.

Utilities were a poor performer as a group over the month no doubt reflecting risks of higher interest rates as investors increasingly become concerned about the potential for interest rate policy to normalise. As a sector they can be more vulnerable than most to rising rates.

Our emerging market exposure, managed by Somerset Capital, had a poor month underperforming in what have been very strong markets. This is somewhat to be expected given their lower risk, measured investment style. Looking forward our strategy remains focussed on companies with reasonable valuations and sound balance sheets something we are very comfortable with.

While the threat of rising interest rates remains a key challenge to global share markets and a potential source of increasing volatility we remain positive on global share markets based on improving economic and earnings trends.


Early withdrawals from your KiwiSaver account

While the overriding objective of KiwiSaver is to encourage and help New Zealanders save for their retirement, importantly there are a number of ways that you can access your savings should your circumstances change. In addition to withdrawing funds to help buy your first home, KiwiSaver legislation also contains provisions for withdrawal in the event of significant financial hardship, serious illness, death and permanent emigration. As each of these situations is considered "unusual" or "extraordinary", KiwiSaver legislation sets out how these are reviewed.

All early withdrawal applications are reviewed and adjudicated by the Scheme's Trustee, Trustees Executors Limited. Fisher Funds does not make any decisions regarding these applications. Our role is to help you complete the form accurately and gather the relevant documentation in support of your application.

Should you or a family member find yourselves needing an early withdrawal we encourage you to contact us so we can help determine whether you are indeed eligible. KiwiSaver involves an element of "red tape" just as many other businesses do, and there is paperwork to complete and supporting evidence to be provided which does need to be witnessed by a Solicitor, Justice of the Peace, Notary Public or someone authorised to take a Statutory Declaration. This can all be very daunting and confusing. We're here to make the process as easy as possible in what is typically a stressful and emotional time.

The following section aims to shed a little more light on each of the early withdrawal scenarios:

Significant financial hardship

You may make a withdrawal (excluding the Government Kick-start and Member Tax Credits, which stay in your account) if the Trustee is reasonably satisfied that you are suffering or are likely to suffer from significant financial hardship. Significant financial hardship includes significant financial difficulties that arise because of:

  1. A member's inability to meet minimum living expenses; or
  2. A member's inability to meet mortgage repayments on his or her principal family residence resulting in the mortgagee seeking to enforce the mortgage; or
  3. The cost of modifying a residence to meet special needs arising from a disability of a member or member's dependent; or
  4. The cost of medical treatment for an illness or injury of a member or a member's dependent; or
  5. The cost of palliative care for a member or a member's dependent; or
  6. The cost of a funeral for a member's dependent; or
  7. The member suffering from a serious illness.

The Trustee:

  1. Must be reasonably satisfied that reasonable alternative sources of funding have been explored and have been exhausted; and
  2. May direct that the amount withdrawn be limited to a specified amount that, in the trustees' opinion, is required to alleviate the particular hardship.

Serious illness

You may apply for a withdrawal of your KiwiSaver contributions if you are suffering a serious illness. Serious illness is defined in the KiwiSaver Act as meaning an injury, illness or disability that results in:

  • The member being totally and permanently unable to engage in work for which he or she is suited by reason of experience, or training, or any combination of those things; or
  • That poses a serious and imminent risk of death.

Death

If you die, the entire proceeds of your KiwiSaver account is paid to your estate. There is not an option at this point to nominate a next of kin or beneficiary.

Permanent emigration

If you permanently emigrate from New Zealand, to anywhere other than Australia, then you have two options:

  • One year after you have permanently emigrated you may withdraw your entitlement (excluding your Tax Credit Amount) from the Scheme; and
  • Alternatively, at any time after you have permanently emigrated, you may direct us to transfer your entitlement (excluding your Tax Credit Amount) to an overseas superannuation scheme authorised for that purpose.

Getting to know Ashley Gardyne

Ashley GardyneMany of us are envious of the Fisher Funds international equities team – they get to travel regularly, encounter new people and places, and experience cultures and settings that are vastly different from their day to day home life. Ashley enjoyed all these things before he even joined Fisher Funds. He was born and raised in Southland, completed a Masters degree in Finance at Otago University and then spent ten years in the fast-paced world of mergers and acquisitions in New Zealand and London. He was obviously destined to join the financial services sector – like guru Warren Buffett, Ashley's first job was a paper run!

While in London Ashley enjoyed exploring Europe, the Mediterranean, the Middle East and Africa with wife Kirsty. We're not talking long weekends in Majorca, but rather, diving trips to the Red Sea in Egypt, sailing around the Greek and Dalmation Islands, climbing Mt Kilimanjaro in Tanzania and skiing and hiking in the Swiss Alps! Ashley and Kirsty returned to New Zealand for a slightly quieter and "more outdoorsy" way of life and are enjoying sharing this relaxed (but still active) lifestyle with their two young sons, Jack and Oliver, who at two-and-a-half and one-and-a-half are being introduced to their first season in the snow this year.

Ashley joined Fisher Funds in May last year and has made his mark on the International portfolios by finding, analyzing and recommending new portfolio stocks as well as monitoring our existing holdings to make sure they are doing what we expect of them.


Fund Facts

Fund Performance (as at 31 July 2014)

Fund After Fees & before-tax Returns 3 Months 1 Year 2 Years* 3 Years* 5 years* Since Launch*
Preservation Fund +0.9% +3.3% +3.4% +3.2% +3.1% +4.1%
Conservative Fund +1.6% +7.4% +7.1% +6.8% +6.9% +5.2%
Balanced Fund +1.8% +10.5% +11.1% +8.9% +8.1% +4.9%
Growth Fund +1.8% +12.5% +14.6% +10.5% +9.3% +3.5%
Equity Fund +1.8% +14.7% +16.5% +10.6% +9.0% +0.9%
Cash Enhanced Fund +1.6% +6.9% +6.2% +6.2% +5.8% +5.1%

* Annualised return before tax and after fees

The above returns are based on the percentage change in the unit price of the fund for the period specified, they are not the returns individual investors will receive as this will depend on the prices at which units are purchased on the date of each individual contribution. Changes in the unit prices reflect changes in the market value of the assets of the fund. The above returns exclude government contributions and no allowance has been made for monthly administration fees. Returns displayed are after management fees but before tax.

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