The latest data released for KiwiSaver performance as at June 30, 2013 is from Grosvenor Financial Services. (Our previous story covering the returns up to March 31, 2013 can be found here).
For the period ending June 30, it is not real surprise the Grosvenor portfolios with high concentrations of shares have generally out-performed the more conservative portfolios with higher exposures to fixed income securities given equity markets have been rising steadily and some indices are near all time highs.
Against the backdrop of rising equity markets we have been intrigued to see the Grosvenor Trans-Tasman Smaller Companies Fund has taken a hiding since the beginning of the year.
Seventy percent (70%) of the fund is allocated to Australian smaller companies with the balance (30%) in NZ equivalents. The Australian market as a whole has been under pressure as their economy struggles to gain any meaningful momentum and the resource boom tapers off.
With investors seeking the relative safe-haven of larger blue-chip companies with greater liquidity, smaller companies have to a large extent fallen out of favour with the investing public.
On a year to date basis this particular fund is down 10.8%, and it gets worse as over the past three months the fund is down 15%. The picture is much brighter over a longer time frame where the return is a positive 4% over 12-months and +1.7% p.a.for the past three years.
We have mentioned on a number of occassions the Trans-Tasman Smaller Companies Fund is for thrill seekers who are looking for a high octane fund and can accept a high degree of volatility in the returns from period to period.
Looking at other positives, the Grosvenor International Fund and Socially Responsible Fund have been the top performers over the past 12-months with +20% and +17.2% returns respectively.
Over the past five years the Conservative Fund has been the winner providing investors with just over +5.1% p.a.
Readers may not be aware that Grosvenor supports the current global trend towards explicitly incorporating Socially Responsible Investment (SRI) criteria and this filters in to their investment decision-making process.
Since inception in 1998, Grosvenor has offered an alternative range of “ethical” investment portfolio options which excluded direct investments in companies where a significant component of their business derives revenue or earnings from tobacco, alcohol, gambling or armaments.
For all of the Grosvenor KiwiSaver Scheme portfolio options, Grosvenor has adopted the following policies:
- All directly-held investments (cash, bonds and equities) will be subject to the basic exclusion filter, i.e. no direct investments in companies where a significant component of their business derives revenue or earnings from tobacco, alcohol, gambling or armaments
- All investment decision-making will be guided by The Principles for Responsible Investment as developed by institutional investors and convened by the United Nations.
- No external funds will be recommended where their investment mandates and strategies are clearly inconsistent with the above Principles, or where they are unable to provide satisfactory information regarding exposures to the currently recommended excluded industries.
Grosvenor do point out that two Vanguard international share index funds they use in portfolios are strategically designed and managed to effectively replicate the performance of the widely recognised markets of developed countries. Currently only 4% of these index funds is invested in stocks categorised in either of the tobacco, gambling, alcohol or defence sectors and most of these are large multinationals for whom these activities are not their primary source of revenue.
While we do not have the exact breakdown of the allocation to Vanguard in each of the portfolios we would imagine that for many KiwiSaver investors the 4% exposure to "unehtical" investments when extrapolated out as a percentage of the international share exposure and evaluated in terms of the entire portfolio will actually equate to being insignificant.
We noted in our last review that Grsovenor stood out from other KiwiSaver providers in that they did not hold global bonds and over 60% of their Socially Responsible Fund was invested into NZ & Australian Shares. Grosvenor have not changed their strategy over the past quarter and continue to run these positions.
Another interesting observation around the asset allocations is that compared to last quarters data some of the portfolios have seen an increase in their NZ & Australasian share exposures and a decrease in NZ fixed income (bonds and cash). The main re-allocation from NZ bonds to Australasian shares has occurred within the Conservative, Balanced and Balanced Growth portfolios where between 6% to 14% has been shifted between the two asset classes.
Below is a table of the longer term performance of the Grosvenor funds. The return data is before tax and after fees and is as published by the managers. (No adjustments have been made to take into account those additional fees which scheme providers may charge and which are not included in calculating the fund performance. We do make such adjustments, but they will not be included until the full benchmarking is published.)
Grosvenor KiwiSaver Scheme
(30 June 2013)
|Since inception (1 Oct 2007) (p.a.)|
|Enhanced Income Fund||3.3%||4.1%||4.8%|
|Balanced Growth Fund||12.4%||n/a||n/a|
|Geared Growth Fund||16.4%||n/a||n/a|
|High Growth Fund||16.5%||2.6%||0.0%|
|Socially Responsible Investment Fund||17.2%||n/a||n/a|
|Trans-Tasman Small Companies Share Fund||4.0%||n/a||n/a|
|International Share Fund||20.0%||n/a||n/a|
More detailed performance reporting can be found here ».
The table below outlines the assset allocation for each fund as at 30 June 2013.
Grosvenor KiwiSaver Scheme
|NZ Bonds (%)||
NZ & AU Shares
|Enhanced Income Fund||6.2||93.8|
|Balanced Growth Fund||4.3||27.4||30.1||38.2|
|Geared Growth Fund||4.3||11.1||29.7||55.0|
|High Growth Fund||2.5||11.3||30.1||56.1|
|Socially Responsible Investment Fund||1.4||14.0||64.1||20.6|
|Trans-Tasman Small Companies Share Fund||6.8||93.2|
|International Share Fund||2.8||97.2|
Note: due to rounding the numbers may not add up to 100%.