Brook's KiwiSaver results illustrate how much of a headwind their Australian shareholdings have been on portfolios

Brook's KiwiSaver results illustrate how much of a headwind their Australian shareholdings have been on portfolios

The latest data released for KiwiSaver performance as at June 30, 2013 is from Brook. (Our story covering the returns to March 31, 2013 can be found here).

In their latest update to investors Brook highlights a concern about how sustainable growth will be without the support of very low interest rates (i.e. when the US Fed starts to taper back its QE program) and the impact on the global economy when monetary conditions start to tighten.

Despite the negative and at times quite volatile backdrop developed market global equities still managed to record positive returns for the June quarter.

Emerging market equities were are different story and showed little resilience after having previously been benefactors of low interest rates and cheap global liquidity.

According to Brook the Fed tapering back QE and the head wind of higher interest rates makes Emerging Market stocks a less compelling proposition.

Closer to home, New Zealand equities finished the quarter in positive territory and again performed better than our Aussie counterparts. Falling commodity prices, weakness in China and continued downgrades from Australian corporates (particularly mining companies).

Conservative investors with high NZ fixed interest holdings have fared better than some who have a mix of local and global bonds in local currency terms.

For example the JPMorgan Global Aggregate Index in US$ was down 2.8% for the quarter compared to the ANZ Composite Bond Index which lost 1.6% for the same period. Brooks says that despite the constant stream of positive news flow the housing market being "overheated" is a threat to New Zealand's financial stability.

This is forcing the RBNZ to use macro prudential tools to try and dampen excessive credit growth (i.e. borrowing) and strengthen the financial system.

For the first time in a few quarters the returns from Brook have been what we would describe as "below par".

Not long back the Growth Fund was the number 1 performer.

This time round both the Balanced and Growth Funds are in the bottom half of the leader board when compared on their last three year returns.

The actual return numbers are solid enough when looked at in isolation so the variance away from the market we would guess is derived from the asset allocation for each fund which we will discuss in more detail. The actual asset allocation numbers can be found in the table below the performance data.

There were some significant changes to the Growth Fund in terms of the exposure to Australasian Equities during the quarter.

The manager switched out of the non-KiwiSaver Trans-Tasman Fund and into another non-KiwiSaver fund the Brook Premium Share Fund. This is significant as the Premium Share Fund has a bias towards NZ companies (currently approximately 80% is in NZ).

Part of the under-performance of the Trans-Tasman Fund will invariably have been the drag the high weighting to Australian shares has had. The Trans-Tasman Fund at 30 June had approximately 40% exposure to Australian companies (the Premium Share Fund which has 6% Australian companies). The exposure to the fund as a whole does not change (approx 38% of the fund) however the asset mix does.

This switch signals to us the manager expects NZ equities to outperform Australian equities for some time to come.

The Balanced Fund made the same internal switch from the Brook Trans-Tasman to Premium Share Fund and the manager notes most of the return for the quarter was generated out of global equities. The allocation to the non-KiwiSaver Premium Share Fund remains at approximately 11%.

The Conservative KiwiSaver Fund made a return of 1.7% for the June quarter. There were no significant changes to report and the fund invests a majority of investor's money via Brook's non-KiwiSaver Income Fund. 

Below is a table of the longer term performance of the Brook 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.)

Brook KiwiSaver Scheme
(30 June 2013)
1 year
5 year
Since inception
(1 Oct 2007)
Conservative Fund* n/a n/a 6.2
Balanced Fund 13.0% 4.0% 4.7%
Growth Fund 18.7% 4.8% 5.1%






* This fund started in July 2012 so the data is for the period to 30 June 2013.

More detailed performance reporting can be found here ».

The underlying asset allocations as at 30 June 2013 for the individual funds are outlined below (sourced from Morningstar).


Brook KiwiSaver Scheme
(30 June 2013)
NZ Fixed Income
Global Fixed Income
NZ & AU shares
Global Shares
Conservative Fund 28.4 37.4 10.3   14.7 9.2
Balanced Fund 11.8 28.1 7.7   19.6 32.8
Growth Fund 10.7 4.1 1.1   34.6 49.3







We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.