In July 2024’s What’s been happening in the markets article we cover Simplicity’s fund changes, the closure of the Flint platform, and look at how the NZ sharemarket has performed over the month.
This article covers:
1. Product updates
2. Market Movements
3. What we’ve been up to
1. Product updates
Simplicity introduces a cash option
Simplicity have renamed their non-KiwiSaver Defensive Fund to the NZ Cash Fund. In addition to the name change, the fund’s investment strategy has changed to invest only in cash (which includes bank deposits, short-term bonds, and other debt securities). For reference the investment mix of the Defensive Fund was primarily made up of NZ and international bonds, with a small amount of cash and unlisted property.
This change should better serve short-term investors. Given the old Defensive Fund invested in bonds, investors needed to take on the risk of seeing small downturns in the fund’s value. Cash funds are much less likely to experience fluctuations in value (which is suitable if you need the money in the very short-term such as for a holiday or a house deposit), though this comes at the expense of lower potential returns.
Simplicity tell us that the yield to maturity of the Cash Fund’s underlying assets is 6%. This figure isn’t a guarantee of the fund’s returns though, as yields will fluctuate as the fund’s underlying assets are bought/sold/replaced. In terms of fund management fees, these have dropped from 0.25% to 0.10%.
Simplicity’s KiwiSaver Defensive Fund is unaffected by this change and will remain as a Defensive Fund at this stage.
Flint shuts down
Flint Wealth was a fund platform that offered around 100 funds from several different fund managers (including Fisher Funds, Milford, SuperLife, and Harbour). The platform suddenly shut down this month as Trustees Executors, the supplier of Flint’s behind the scenes (custodial and registry) services, withdrew their services to Flint. This followed the purchase of Trustees by Apex Group (which also happens to be InvestNow’s parent company).
The closure of the platform doesn’t mean investors have lost their money. They’ve been able to sell off units in their funds, allowing them to get their money out and reinvest it however they wish on another platform. Though they may have had to incur spreads when selling and rebuying their funds, as well as the potential cost of being out of the market during this process, given there was no option for investors to transfer their fund holdings out to another platform .
Fortunately Flint’s closure isn’t a massive loss to the New Zealand investing community. They didn’t really offer anything different over InvestNow, and there are already plenty of alternative options to invest in funds such as directly via a fund manager.
Further Reading:
– Flint Wealth review – A superior InvestNow clone?
– What happens to your money if InvestNow or Sharesies go bust?
2. Market Movements
Here’s how the markets have performed in July 2024 (as at 31 July), in both their local currencies and in NZ dollar terms:
Local currency | NZD | |
NZ shares (S&P/NZX 50) | 5.87% | 5.87% |
Australia shares (S&P/ASX 200) | 4.18% | 4.57% |
US shares (S&P 500) | -0.44% | 2.42% |
Japan shares (Nikkei 225) | -1.22% | 8.76% |
UK shares (FTSE 100) | 2.50% | 7.07% |
Bitcoin | 5.84% | 8.88% |
New Zealand shares had a strong month rising 5.87% after struggling for much of the year. Firstly, inflation figures for the quarter ending 30 June 2024 came in at 3.3%. This figure is getting close to the Reserve Bank’s target inflation range (of between 1-3%), giving the market optimism that interest rate cuts are just around the corner – perhaps as soon as August. Lower interest rates are generally considered beneficial to the economy, and especially to high-yielding companies like Spark and Genesis Energy whose share prices have struggled against the high interest rates currently offered by term deposits.
Secondly, retirement village operator Arvida received a takeover offer. If the deal is approved, shareholders will be paid $1.70 cash for each Arvida share they own, and the company will be delisted from the NZX. The takeover price of $1.70 is at a hefty premium to the $1.03 Arvida shares last traded prior to the offer being announced. This resulted in a boost to other NZ retirement village companies as the premium suggested that the sector’s share prices may have previously been undervalued.
1 month return | |
Ryman | +26.54% |
Summerset | +17.89% |
Oceania | +50% |
Retail company The Warehouse Group also announced they were a takeover target, with Australian private equity firm Adamantem Capital, together with Stephen Tindall (The Warehouse’s founder) expressing interest in buying all shares in the company at an indicative price of $1.50 to $1.70 per share. There’s no firm timeline or next steps, but this takeover proposal saw Warehouse shares jump up 42% for the month.
Meanwhile, US shares were slightly down this month (by 0.44%), though when translated back to the NZ dollar, the S&P 500 was up 2.42%. This example shows the potential difference in performance between currency hedged and unhedged funds. In this case a currency hedged S&P 500 fund would have delivered a return of about -0.44%, while an unhedged S&P 500 fund would have delivered a return of about 2.42% as the falling NZ dollar offset the decline in the index.
Here are the year-to-date results:
Local currency | NZD | |
NZ shares (S&P/NZX 50) | 5.39% | 5.39% |
Australia shares (S&P/ASX 200) | 6.61% | 8.22% |
US shares (S&P 500) | 13.98% | 21.50% |
Japan shares (Nikkei 225) | 16.85% | 16.19% |
UK shares (FTSE 100) | 8.24% | 16.40% |
Bitcoin | 56.85% | 67.20% |
3. What we’ve been up to
It’s been a boring month for our finances, with nothing special happening apart from us getting our annual $521.43 boost to our KiwiSaver accounts from the New Zealand government. Did you get your KiwiSaver government contribution this year?
Outside of investing we’ve been watching a few sports (mainly rugby and the Olympics), did a lot of cooking and baking at home, and went to the Auckland Food Show where we sampled and bought lots of great products. We didn’t have any restaurant/cafe highlights for the month apart from Mitten Drin in Avondale who had some awesome German food.
Thanks for reading and your ongoing support!
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Disclaimer
The content of this article is based on Money King NZ’s opinion and should not be considered financial advice. The information should never be used without first assessing your own personal and financial situation, and conducting your own research. You may wish to consult with an authorised financial adviser before making any investment decisions.
Thanks for the monthly report MoneyKingNz
What about a post about the 3-5 cents spread when buying, let’s say, Smartshares AUS ETF via Investnow? How does it compare from buying it using Sharesies? Is there any other more effective ETF or fund of Australian shares?
Thanks in advance
You would be subject to the spread regardless of whether you use InvestNow or Sharesies as you’re buying the units from the same market. With Sharesies you can of course set limit prices on your orders (e.g. at around the highest bid price), and hope that someone crosses the spread so that effectively the spread does not apply to you. However, the downside of Sharesies is that you need to pay a transaction fee, while InvestNow lets you buy the same units for free.
Only Smartshares does Aussie ETFs in NZ, otherwise you can buy an ASX listed Australian ETF through an ASX broker. That would come with its own set of transaction fees and foreign exchange fees though.
A great month! We made $14,162.70 over July (our best ever month) in our 6th year of investing. This is across all our investments (Kiwisaver, Shares, ETF’s, TD’s etc …) – Considering we’ve made just over $15k this year to date, this was most welcomed.
How about including comments of the upcoming funds from Investnow (they’ve just announced it)?
The QQQ and SCHD wrapper funds? At this stage it’s just an indication that those funds are coming. It would be premature to comment without the full details and disclosure documents.
Simplicity latest SIPO still details investment in unlisted NZ equities in fund investment strategy.
I note that they do not provide details in their fund updates.
They really need to provide a greater degree of transparency regarding the size and performance of this investment and investment in NZ unlisted property.
Their Growth and High Growth funds invest in (and always have invested in) unlisted NZ Equities. You are right, it’s not particularly transparent, though if you download each fund’s full holdings from the Disclose Register you might be able to see the extent of these unlisted holdings.
Their NZ unlisted property investments are easier to identify as this is purely an investment into Simplicity Living, which makes it easy to identify on a fund’s holding disclosure, or something you can research on their website: https://www.simplicityliving.kiwi/