Investment Environment Report - February 2017
POSTED ON: 15 February 2017
In this ‘Investment Environment Report’, Dr Roland Winn, Senior Investment Strategist, explains the global investment environment and its implications for the NZ Super Fund.
The economic environment remains benign, with forecasts for global growth at a modest 3.4% for 2017, despite very accommodative monetary policy internationally.
While there are some signs of an increase in inflation, it is generally expected that this recovery will be slower than in the past.
The United States economy is expected to outperform relative to other advanced economies, supported by a strong labour market and fiscal stimulus.
Developed equity markets are continuing their upward momentum, owing to a weaker post-Brexit British pound and expectations of tax relief and infrastructure spending by the Trump administration.
The United States election result, however saw Sovereign Bonds weaken materially.
What does this mean for the Fund?
While the Fund remains heavily weighted to growth assets, in keeping with its long investment horizon, most investment opportunities are currently sized below their risk budget levels.
Nevertheless, we funded substantial new allocations to managers and direct investments in the last half year. New investments in factors, merger arbitrage and Kiwibank comprise 6.6% of the Fund’s net asset value. We also increased our commitment to distressed credit by 1%.
The long-term nature of the Fund means we’re in the fortunate position to be able to ride the peaks and troughs of the market and pursue long-term investment strategies. The continued geopolitical risks in the next 12 months, with a busy European political calendar and continued fallout from Brexit, may well create investment opportunities for the Fund. We are also working hard to identify and shape new investment opportunities of scale in New Zealand.
This report has been prepared as a high level summary of certain matters of interest. It is necessarily generalised and may not be relied upon. It does not constitute financial, taxation, legal or professional advice. Any forward-looking statements in this report are subject to risks and uncertainties, and actual events may differ. No representation or warranty is given as to the accuracy or completeness of this report. To the maximum extent permitted by law, Guardians of New Zealand Superannuation as Manager and Administrator of the New Zealand Superannuation Fund (and its affiliates, officers, employees and agents) exclude any liability and responsibility in connection with this report.