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December 2013 Newsletter

Carmel Fisher

I'm sure it's not just me who thinks the past year disappeared at an even faster rate than usual! The summer holiday period is always a good time to reflect on the year that has been, the highlights and lowlights, and start planning for the year ahead. We hope that your KiwiSaver experience was one of the highlights of 2013 – if only because your investment returns have left you one step closer to realising your retirement savings goals.

We would like to thank you for your continued support since we took over TOWER Investments earlier this year and we hope you have a Merry Christmas and a safe and Happy New Year. We look forward to catching up with you in 2014 and continuing to work with you to grow your retirement nest egg.

Our next newsletter will be in February 2014 but keep an eye out on your mailbox before then for some exciting news from us. Read on...

Carmel Fisher
Managing Director | Fisher Funds

Investment commentary - what's driving fund performance?

arrow blueAs another year draws to a close it is satisfying to reflect on a good year for our KiwiSaver members with all of our Funds delivering strong positive returns in line with their investment objectives. Given the year started out with concerns about the US Fiscal Cliff and then we had the midyear speed wobbles when the US Federal Reserve started talking about "tapering", it is perhaps a sign of maturity that the market took the news so easily in its stride.

While global share markets edged higher in November, closer to home both the New Zealand and Australian share markets ended the month in negative territory. The New Zealand share market has had a strong run this year (over the last three years in fact) so a breather is not to be unexpected. However, it is the cause of the breather that is of most interest. The Chorus debacle which saw its share price fall nearly 50% in November alone has heightened awareness among investors of the regulatory and political risks that exist with an election year coming up. This had a flow on effect to other companies that are potentially subject to such regulatory influences like Sky City and the gentailers (Mighty River Power, Meridian Energy etc). For the record we don't hold Chorus shares in your KiwiSaver portfolios.

Politics aside, the signs for the New Zealand economy still look encouraging with strong employment and business confidence levels, improving export earnings and 2014 GDP growth rates being revised up to potentially 4% - among the highest in the developed world.

The Australian share market continued to lag global share market indices. While there are signs emerging of a pickup in economic activity we need to see more evidence of this before getting too excited and increasing our weightings to the "lucky country" again. The Australians have utilised their macro toolbox over the last 18 months, cutting interest rates which helps lower the cost of servicing debt for householders and encourages investment by businesses. This has also helped drive the Aussie dollar down, a big help for exporters.

Internationally, the picture remains mixed. The US economy continues to improve with the recent reporting season delivering more positive revenue surprises for S&P 500 companies than negative surprises. There were also signs of margin expansion driving increased earnings in certain sectors which is encouraging as there is only so much cost cutting businesses can achieve to impact the bottom line.

Investors clearly have more confidence in the US recovery than they do in Europe where unemployment remains stubbornly high and the "union" remains fragile. This is reflected in higher US company valuations but Europe does present longer-term buying opportunities.

As always our focus remains on the future prospects of our investments and we end 2013 with your portfolios well positioned for the year ahead.

You can review the TOWER KiwiSaver Scheme's historic returns online.

Introducing Murray Brown

introducing murray brown

Murray joined Fisher Funds in March 2008 and is responsible for overseeing the New Zealand shares component of the TOWER KiwiSaver Scheme Funds. Murray has over 30 years experience in the investment industry with extensive industry knowledge covering a range of companies and sectors within New Zealand. Prior to joining Fisher Funds Murray spent ten years at First NZ Capital where he was Director of Research and prior to that he spent seven years at Ord Minnett where he was also Head of Research.

Lump sum to invest?

KiwiSaver lump sum to investWe’re often asked by members if they can make a lump sum deposit into their KiwiSaver account. The answer is yes, and people do it from time to time for various reasons such as:

  • A gift to children or grandchildren
  • To avoid the temptation of spending it recklessly
  • To help kids towards buying a first home

There is no cost to making voluntary contributions and there are many ways to do this. We have a web page outlining your potential payment options.

One thing to bear in mind is that all contributions to KiwiSaver are locked-in until you are eligible to access your funds in retirement. If you think that you may need to access that capital at some point in the future or you change your mind then you aren’t able to get it back.

We have many other investing options outside of KiwiSaver that can provide solutions for investing a lump sum without locking up your funds. We can work with you to determine the most appropriate strategy based upon your investing timeframe and your investor profile. If you would like to discuss your options with us, please contact our friendly Client Services team on 0800 808 808.

Is your KiwiSaver money in the right fund?

managing your kiwisaverIf you were automatically enrolled in KiwiSaver by your employer, through Inland Revenue, your savings have been automatically invested in the Cash Enhanced Fund – the default investment option. This Fund is considered lower risk/return and is more suitable for members with a short-term savings horizon such as those saving for a first home or near retirement. While low risk, this Fund may not be the most appropriate for members who have a long time to retirement.

We want you to know that you do have plenty of options. We can work with you to review your situation and help you identify the most appropriate investment option so your savings approach suits you. We’ll also take care of any necessary changes so it is an easy process for you.

The New Year is a good time to review your KiwiSaver account and investment strategy and we’re happy to help. Call our friendly Client Services team on 0800 808 808 and together we can make it happen.

Jargon buster

jargon busterWhile we try to keep our communications simple to understand, sometimes investment industry lingo can sneak in.

In each edition of TOWER KiwiSaver Scheme News we’ll aim to bust some of that jargon. This month we discuss currency hedging.

Currency hedging is a strategy to reduce the impact of currency on investment returns from overseas assets. Your KiwiSaver money is not only invested in New Zealand but also in Australia and further afield. The KiwiSaver Growth Fund, for example, had investments in over 35 countries.

In New Zealand, a currency hedge might be used when investing in overseas markets if it is thought that the value of the New Zealand dollar will strengthen relative to other currencies and thus negatively affect the returns of those investments when converted back to New Zealand dollars. The New Zealand dollar may strengthen if the New Zealand economy is considered to be in a stronger position compared to the country and currency it is being compared against.

Another factor that influences currency is relative interest rates. Some investors may seek out currencies that offer them a higher return when invested in that currency than what they can achieve in their own country. This influence was prevalent in New Zealand during the mid to late 2000’s as our interest rates were very high compared to many countries. You may recall media headlines talking about Japanese housewives or Belgium dentists buying the Kiwi dollar.

Decisions to hedge are made on a currency by currency basis and are actively managed. No two currencies have the same profile so we take a “view” on each of these currencies relative to the New Zealand dollar. Our view then dictates which currencies we hedge and how much. Hedging is typically done progressively as currency moves away from what we consider “fair value”.

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