Friday 24th of April 2009

It may be naive of me to think this, but one day markets will recover and return to what we remember as normal. (As long as it happens before our memories go on us.) When that happens the whole KiwiSaver space will have a massive shake-up and the performance of managers will change significantly. I started thinking about this after seeing the latest performance numbers and saw that many which had done well have hidden behind cash. A smart move today, but when things change surely they will get left behind in the returns race. It would be useful to know what will be the catalysts for getting managers, particularly with growth mandates, to change their portfolios. The other bit I pondered was that it seems many younger, and arguably higher risk investors, are in low risk funds. How do we get advice to them and make sure what they invest in is appropriate for their investing horizon? I did see something recently which suggested that the rules should be changed so default options are more suitable to the client. Many managers now use a “lifestages” type approach where the asset allocation is automatically altered to reflect the investor’s time horizon. This is something which would be a positive enhancement to KiwiSaver. While lifestages is one option, I was also fascinated to see what NZ Funds is doing at the moment with its funds. In essence, it is taking a lot of the academic, jargon-filled bits out of investing and tailoring portfolios on a behavioural finance approach. In other words, they are approaching it on human terms. If you want to learn more about what I think is something very fascinating in asset allocation, then get your hands on a copy of the April issue of ASSET.