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May 2014 Newsletter

Carmel Fisher

The combination of Easter, school holidays and Anzac Day sure made for a stop-start month, a phenomenon that seemed to afflict markets as well! You can read more on this in our usual Investment Insights section. There has also been a lot of noise lately about Labour's plan to use KiwiSaver contributions to control inflation. We dedicate the KiwiSaver classroom section to outlining what this is all about. Just remember they will need to be elected for these changes to be made.

Carmel Fisher
Managing Director | Fisher Funds

Team Talk

Mark Brighouse evaluates Labour's proposal to use KiwiSaver to control inflation.

Watch video

At a Glance

As at 30 April 2014

Unit Prices ($)
Preservation Fund $2,580.4697
Conservative Fund $1.4393
Balanced Fund $3,768.1982
Growth Fund $1.3014
Equity Fund $3,208.5142
Cash Enhanced Fund $1.3893
Net Performance (April 2014)
Preservation Fund + 0.3%
Conservative Fund + 0.7%
Balanced Fund + 0.9%
Growth Fund + 1.1%
Equity Fund + 1.3%
Cash Enhanced Fund + 0.7%

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Investment Commentary

Investment commentaryApril was a good month for members of the Fisher Funds TWO KiwiSaver Scheme with positive performances recorded by all funds. The funds again benefitted from a strong performance from international equities relative to the benchmark. The trans-tasman equity strategy also benefitted from participation in the Genesis Energy IPO and from being underweight in Xero. Global markets certainly aren't performing in unison at present reinforcing the benefits of appropriately diversified portfolios and, on the whole, have been relatively flat in 2014.

New Zealand continues to be one of the better performing markets worldwide. There's no doubt New Zealand is in a "sweet spot" enjoying robust consumer and business confidence levels, rising house prices and building starts and strong net migration all of which are contributing to above trend economic growth rates. This strength has seen the Reserve Bank lift interest rates by 0.25% twice in the last two months to try and keep the economy from overheating.

Strength continues to return to the US economy with economic data releases in April indicating a rebound in consumer and business behaviour following weak readings earlier this year that were heavily influenced by the extreme cold conditions throughout large parts of the Northern US. The US Fed Reserve tapered its asset purchases by a further $10bn during the month in recognition of the improving economy.

While domestic economic news in Australia was mixed, there was one bright spot. April was a strong month for corporate activity. South African firm Woolworths offered to acquire retailer David Jones at an attractive premium, Singaporean company Wilmar bid aggressively for food producer Goodman Fielder and Stockland shares rose as it bid for domestic rival Australand Property Group. Domestic challenges notwithstanding, it is encouraging that successful international companies are finding Australia an attractive investment destination.

We've written for some time now about the likelihood of experiencing greater volatility this year than we have in recent years and we still hold this view. We're closely monitoring New Zealand company valuations which are above long-term averages, we're underweight in our exposure to Australia (as discussed in April's newsletter) and while Europe continues to grapple with the geopolitical tensions in eastern Ukraine, we're looking for signs of life in areas outside the strongholds of Germany and France.

Spotlight on:

"UPS has more planes
than British Airways
and more trucks than
New Zealand"

This month we profile one of our portfolio companies US parcel delivery heavyweight United Parcel Service (UPS). UPS is the world's largest package delivery company and operates in over 220 countries and territories with its fleet of 100,000 ground vehicles and 530 aircraft. The market dynamics of the global freight industry are compelling, with high barriers to entry given the need for a large international network and delivery route density to be competitive. In addition to the strength of their business model, UPS are set to benefit from the growth in ecommerce activity and increasing cross-border trade volumes in Asia and Europe. We are attracted to the strength of UPS's business model and the growth tailwind from ecommerce in coming years.

KiwiSaver Classroom

Labour's KiwiSaver Plan upgrade

The Labour Party dominated media headlines over the last couple of weeks with their monetary policy announcement that involved KiwiSaver. We've fielded enquiries from members wanting to better understand the proposed role of KiwiSaver. We thought all of our members could benefit from an explanation of the proposal.

What is the background to the Labour Party policy?
The Reserve Bank of New Zealand (RBNZ) is tasked with maintaining price stability (inflation). The key tool it has in its arsenal to achieve this is the Official Cash Rate (OCR). When the economy is growing strongly and prices are rising too quickly, the RBNZ increases the OCR which dampens down economic activity as more of household's cash is diverted into mortgage repayments rather than spending on goods and services.

What has Labour proposed?
Labour wants the RBNZ to be able to adjust KiwiSaver contributions as well as than interest rates to control inflation.

How would it work?
To curb rising inflation, money would be removed from the economy by forcing people to save more through higher KiwiSaver contributions. When the economy was sluggish, contributions could be cut, putting more cash into the economy.

How big would the variations be?
Labour says contributions would be varied by 0.5 to 1 percentage point at a time. This would be known as the Variable Savings Rate (VSR).

Does Labour have anything else planned for KiwiSaver?
Yes. It wants to make the Scheme compulsory and lift combined employer-employee contributions from 6 per cent to 9 per cent of employee earnings. The VSR would be on top of this 9 per cent minimum.

Tell us what you think!

Now that you've read about the Labour Party's proposal,
do you support the proposal or are you against it?

Cast your vote »

Managing your KiwiSaver account

Less than 60 days to get your Big Five Hundy!

That's right, the clock is ticking and the end of the KiwiSaver year is getting closer. We're sure you don't want to miss out on the Government's annual contribution to your KiwiSaver account so here's what you need to know.

For every $1 you contribute to your KiwiSaver account you'll receive 50 cents from the Government, up to a maximum of $521.43. This generous KiwiSaver incentive is known as the MTC.

To maximise your full MTC entitlement of $521.43 you need to have contributed at least $1,042.86 (the equivalent of $20 per week) into your KiwiSaver account. If you have not put in at least this amount, you can top up your KiwiSaver account for the current KiwiSaver year (1 July 2013 to 30 June 2014) before Thursday 26 June 2014.

Click here to read more about who is eligible for a MTC, how it is calculated and how to make a payment.

Getting to know Kate Meyers

Kate Meyers

Kate is living proof that women are fantastic at multi-tasking. She packs five days' work into three days, and combines caring for three children at three different schools with her busy role as Institutional Client Relationship Manager, making sure that the needs of all our large wholesale clients are met. She modestly says that she's just like any other working mother – "super busy" – but Kate gives new meaning to the words super and busy!

Kate completed a BA in English Literature and Art History and got her first job in financial services in London through a friend who worked in recruitment. That role was the start of a long career in fund management – Kate spent 19 years with Tower NZ before joining Fisher Funds in 2013 – which Kate has absolutely loved, particularly as she "knows everyone so well after all these years".

When not at work, you will find Kate in her unpaid job being a taxi driver, getting involved in school sports and otherwise helping out at school. She is a huge fan of My Food Bag (as are several of her colleagues) which makes family dinners a breeze and provides an instant answer to the "what are we having for dinner" question. She and her family are "active relaxers" and have completed the Otago Rail Trail and Hauraki Rail Trail and are counting down the days to the start of the ski season.

With a busy work and family life and a husband with a new job, it is hard to imagine Kate squeezing much more in, but after a recent trip to Shanghai and Hong Kong she says she is keen to dust off her passport more often. Good luck with that Kate!

Fund Facts

Fund Performance (as at 30 April 2014)

Fund After Fees & before-tax Returns 3 Months 1 Year 2 Years* 3 Years* 5 years* Since Launch*
Preservation Fund + 0.8% + 3.0% + 3.3% + 3.1% + 3.1% + 4.1%
Conservative Fund + 2.4% + 4.3% + 6.9% + 6.2% + 7.5% + 5.1%
Balanced Fund + 3.9% + 7.2% +10.2% + 7.3% + 8.9% + 4.8%
Growth Fund + 5.0% +10.0% +13.1% + 8.3% +10.7% + 3.3%
Equity Fund + 6.4% +11.8% +14.3% + 6.7% +10.3% + 0.7%
Cash Enhanced Fund + 2.1% + 3.6% + 6.1% + 5.7% + 6.1% + 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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