Newsletter

May 2012 Another good month ... long may it continue. In this issue you’ll read about how your funds fared in April, you’ll be introduced to one of our team members and we give you advance notice of an upcoming change that will result in a lower cost of investing in our Growth Fund (and let’s face it, lower costs are always good!). We’ve also re-introduced a section KiwiSaver Classroom that has an educational focus. Enjoy.

A word from your investment team

After a strong first quarter, opinion was divided over which direction markets were going to take in April. Many pundits were expecting a sell off as was seen in April 2010 and 2011.  Markets initially headed down in the early part of April but following the Easter break, the trend was reversed despite rising concerns over Spain becoming the latest European basket case.

A host of strong profit results out of the US for the first quarter buoyed global markets. Of the 403 S&P 500 companies to report so far, 72% have beaten analyst expectations.  These results have been achieved at least partly by the job and cost cutting actions undertaken by these companies in recent years. While the strong numbers are pleasing there is a limit to how much cost cutting can be achieved before it starts hindering growth so the market will now be looking for revenue growth which means launching new products, expanding into new markets and so on.

In last month’s edition of Nest Egg News we talked about the lower volatility experienced in markets this year.  An interesting statistic that caught our eye recently was that in 2011 there were 35 days where the S&P 500 rose or fell more than 2%.  So far in 2012 this has not happened once. Markets have certainly felt calmer to us and this just backs it up!

Your portfolios fared well in April with both Funds recording positive gains.  In particular, the New Zealand and International components of the Growth Fund led the way forward. In New Zealand, our big three - Ryman Healthcare, Mainfreight and Freightways - made the biggest contribution.  None of these companies released any new information to the market but instead they benefitted from the continuing trend of investors favouring those businesses with strong fundamentals.  Conceptus, one of our American companies, settled a long-running patent dispute that has seen its only competitor withdraw from the market.  Shares jumped 25% on the news; music to our ears!

The Conservative Fund again registered another solid month of performance. Despite continued financial market volatility the Fund’s global reach and active asset allocation process has to date been able to smooth our investors ride. In the first 4 months of this year the Fund has produced a 2.6% return after fees and before tax. The Fund continues to invest a majority of its capital in government and corporate bonds from across a diverse range of countries worldwide.

Portfolio Update

There were snippets of company news released during April.  One of the more interesting announcements was close to home. Trade Me announced the acquisition of Autobase (of which it already owned 25%) further strengthening its hold of online vehicle listings. It also announced an agreement with ChannelAdvisor, a global e-commerce platform provider for online retailers, opening up access to international players that would be difficult to attract on its own.  Both of these moves reflect sound strategic thinking as Trade Me attempts to expand its earnings base.

KiwiSaver Classroom

Credit Ratings 101

From time to time, we are asked by our members what Fisher Funds’ credit rating is. Fisher Funds doesn’t have a credit rating and we aren’t required to as we don’t borrow money from the public or other parties.  Remember, investing is all we do.

A credit rating evaluates the credit worthiness of an issuer of specific types of debt, specifically, debt issued by enterprises such as a corporation or a government. It is an evaluation made by a credit rating agency of the debt issuer’s likelihood of default.  The lower the credit rating, the higher the risk of default and an investor not being repaid what they are owed.

The most well known ratings agencies are Standards & Poors, Moody’s and Fitch. They all have slightly different scales for measuring risk but their approach is similar in that they analyse the borrower’s history and their long term economic prospects.

It pays to remember that a credit rating does not provide absolute certainty that a borrower will meet its obligations.  Rather they act as a guide to the level of risk involved. Many of the finance companies that collapsed in recent years had credit ratings so it certainly pays to do your own homework as well.

Getting to know ...

Monique Bon,
Compliance Manager

Monique joined us nearly two years ago as our Compliance Manager and has hardly come up for air as she’s dealt with the enormous amount of legislative change that has happened and is continuing to happen in the financial arena.  It’s lucky she loves compliance and finds it tremendously interesting!  Monique is a proud ex Wellingtonian and is not too proud to admit that she doesn’t really understand Facebook and is the only person in the office without an iPhone.  She is thankful she has two tech-savvy pre teens at home otherwise she might never have mastered the ‘best invention of the modern age’ – My Sky.

Out of work Monique relaxes with her Martin 000-28LD featuring Solid East Indian Rosewood, Old Style Logo, Rat & G.O.W.R. Abalone Pearl Inlay and 1935 Style Sunburst.  (No, this is not a vehicle, but a guitar).  She rejoices when the Comedy Festival is on, and we love it when Monique regales us with funny anecdotes.

Monique is currently refreshing her Dutch language skills in preparation for a visit to the extended whanau in The Netherlands.

Managing your KiwiSaver

The Growth Fund Performance Fee is Changing

We are making changes to our Growth Fund performance fee that will benefit all members in the Fund over time.  We had always hoped that as our KiwiSaver Scheme grew, the cost to members would come down, so it is pleasing to be able to pass on these savings to our members.
 
In essence, we are making it tougher for us to earn a performance fee, by having a higher benchmark to beat. And we are applying a cap of 2% on the performance fee that can be earned in any year.  The changes will take effect from 1 July 2012. 

View the full breakdown and explanation of the changes.

Member Statements and PIE tax statements

You will shortly begin receiving your quarterly statement to 31/3/12.  These have been sent a little later than normal as we are combining these with your annual PIE tax statements. Remember you do not need to include your PIE tax statement details in your tax return, unless the IRD notify you and request that you do so. If your PIR rate is incorrect for the new tax year you can send us a signed request to update this.

Maximising your Member Tax Credits (MTC’s)

If you need to top up your KiwiSaver account or make your annual contribution you need to do this before Friday 29 June. Remember, if you are aged 18 or over, for every $1 you contribute (up to $1045.72) the government will contribute $0.50 up to a maximum of $522 per year. This contribution is on a pro-rata basis if you have been a member for less than a year, whether you are working or not.

There are several options for you to make payment to ensure you don’t miss out on getting the full benefit of the MTC’s from the government. You can either send us a cheque, make a one-off payment into the Scheme trust account: BNZ 02-0500-0799760-001 or search for Fisher Funds KiwiSaver Scheme in the bill payee section of your internet banking. Enter your Fisher Funds account number or your name and IRD number as references.

No changes to KiwiSaver in this year’s Budget signalled

Fund Facts

Fund Performance

KiwiSaver Growth Fund Performance as at 30 April 2012 KiwiSaver Conservative Fund Performance as at 30 April2012

* Annualised return before tax and after fees ** The Fisher Funds KiwiSaver Scheme does not have a separate Balanced Fund. A Balanced investment strategy is available and reflects a 50% weighting in our Conservative KiwiSaver fund and a 50% weighting in our Growth KiwiSaver Fund. This option has only been available since the launch of the Conservative KiwiSaver Fund in June 2009. 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.