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< Back Aurellan Intergenerational Thinking Podcast featuring Wilshire's Head of Manager Research Chris Di Leva, CFA 17 Nov 2025 Aurellan CEO and CIO, Chris Di Leva, interviews Wilshire's Head of Manager Research, Rob Noe. Rob talked about how Wilshire goes about selecting managers for its US$1.5 trillion client base. In this episode, Rob videos in from Chicago and walks us through: 🎲 Why selecting investment managers isn’t about always chasing “Park Lane and Mayfair.” 🧭 His path to becoming Head of Research at a US$1.5 trillion global firm. 🚀 How rocket science fits into Wilshire’s research and manager evaluation process. A great conversation on judgement, data, humility, process—and what really matters in building enduring investment outcomes. 🎧 Watch / Listen: 🎵 Spotify: https://lnkd.in/g8646a5b 📱 Apple Podcasts: https://lnkd.in/gEpMJJVK ❤️ iHeartRadio: https://lnkd.in/gdKPrjQQ ▶️ YouTube: https://lnkd.in/gaYuGP-x Important Notice: Please note the discussion of the proposed Aurellan Global Shares Fund is for illustrative and planning purposes only. The Fund has not yet launched, and this material must not be treated as a promotion, offer or solicitation under the Financial Markets Conduct Act 2013. Pending regulatory approvals and execution of relevant documentation, no investment in the Fund is currently available. Previous Next

< Back Anthony Edmonds appears on "Beat the bank" podcast 14 Oct 2026 Anthony Edmonds appears as a guest on the “Beat the bank” podcast series and talks about his career, the businesses he has built, Aurellan, and the importance of smart portfolio construction. Previous Next

< Back Aurellan Intergenerational Thinking Podcast featuring Causeway Capital CEO Sarah Ketterer 12 Mar 2026 The ups and downs of 25 years of value investing In the most recent Aurellan Asset Management podcast, Rachel Weld interviews Sarah Ketterer, co-founder of Causeway Capital Management, discussing the firm's evolution from its inception to overseeing approximately US$75 billion today. Sarah speaks openly about: • the ups and downs of building an investment business • the lessons learned along the way • how Causeway has structured itself to endure across generations Causeway is one of the underlying managers in the Aurellan Global Shares Fund, alongside Loomis, Sayles & Company and Los Angeles Capital Management 🎧 Watch below on YouTube 🎙️ Or listen on: Spotify – https://open.spotify.com/show/6E4lg41DEoCcbytV3IiMwZ Apple – https://podcasts.apple.com/us/podcast/intergenerational-thinking-with-aurellan/id1845060554 iHeart – https://iheart.com/podcast/299614352 Previous Next

< Back The shark already has teeth: Looking at the facts around capital gains tax in NZ Anthony Edmonds 3 Nov 2025 A dead shark can still bite — and so can New Zealand’s tax system. Our latest article unpacks why the real question isn’t “should we have a capital-gains tax?” but “how far will Inland Revenue go with the one we already have?” A little-known fact: don’t touch a dead shark’s teeth. In the early days of YouTube, I remember watching a seasoned fisherman get bitten by a dead shark. You would think, given his profession, he had read Eugene Kaplan’s Field Guide to Coral Reefs , which cautions against putting your hand in the mouth of a dead shark as it can, but not always, result in a reflex biting action. It is with the same amusement I find myself watching the political debate raging around whether New Zealand should adopt capital gains tax. This reflects that it appears a key fact being completely lost on our esteemed politicians is that New Zealand already has a capital gains tax regime. However, just like the dead shark, it bites selectively. Under existing tax law, if an investor acquires an asset with the intent of selling it for profit, any resulting gain is taxable income. The complexity lies not in the rule itself, but in how intent is interpreted by Inland Revenue. Take for instance crypto assets like bitcoin and precious metals like gold. Inland Revenue are quite happy to take a tough line stance and say that the only possible “intent” in buying these assets is to make a capital gain when they are sold. They then insist that people pay tax on any capital gains. I assume their view stems from the fact that these assets pay no income or dividends, so Inland Revenue has simply jumped to its own conclusions about intent. Before the introduction of Portfolio Investment Entity (PIE) regime in 2007, the same reasoning applied to New Zealand share funds: since they were in the business of investing in shares, Inland Revenue said their intent must have been to profit from capital gains. When the PIE regime was enacted, the Government explicitly exempted New Zealand share PIE funds from capital-gains tax to give investors — particularly in KiwiSaver — certainty of this tax treatment. The exemption itself is clear evidence that New Zealand has long operated a capital gains tax framework. In contrast, when it comes to individuals investing directly in New Zealand shares, Inland Revenue’s interpretation of “intent” becomes less consistent. But let’s dig into the validity of this. The wider share market, as represented by the S&P/NZX 50 Index, has a weighted average dividend yield around 3.0% (as at 30 September 2025) and some shares, much like bitcoin and gold, do not pay a dividend at all. Given the risks associated with investing in NZ shares it would be impossible to justify why any rational person would invest in shares unless they expected to get a materially higher return than just the dividend yield. The only other source of returns is capital gains, so this fact supports taking a position of saying that all investors holding direct shares must have an intent to make capital gains. Yet IR has tended to take a more lenient view. That leniency is not guaranteed. Inland Revenue recently got a taste of success in terms of taking a harder line around collecting tax. Recently, the media published comments from Inland Revenue saying it had pulled in $12 of tax for every $1 it had spent on chasing money from people. Undoubtedly Inland Revenue would enjoy a great influx of tax revenue if it took a harder line in terms of testing people’s intent when they invest into assets like NZ shares. Those investors in bitcoin and gold will be able to attest to the fact that Inland Revenue is quite capable of imposing its own view about what an underlying investor's intent is in owning assets. I am picking that there would be very few people who would be hugely surprised if Inland Revenue took a hard line in saying that it believed investors had a natural intent to make gains when they invest directly in NZ shares. This reflects that to argue otherwise undermines the logical investment case as to why you would hold these more-risky assets. Further, in a modern world Inland Revenue can quickly see where all the investors are who own things like NZ shares directly. This information resides on the administration platforms used by wealth advisers, online share platforms, and in the registry systems of our listed companies. When Inland Revenue decided that investors in crypto assets like bitcoin should pay tax on their capital gains, they proved to be very effective and efficient in quickly chasing down information on individuals who had made gains. Investors in PIE funds can take comfort in knowing their capital gains on New Zealand equities remain tax-free. Investors holding New Zealand shares directly are needlessly taking a risk that Inland Revenue remains lenient when it comes to forming a view about what their “intent” might be. In future, one option that politicians could take is to say “rather than introducing new taxes, let’s just agree that the intent of this group of investors must be to make capital gains.” It is simple to imagine a politician chewing the ear of the Inland Revenue management team about taxing the gains people had made on different components of their investment portfolio. And this brings us back to politics. While the headlines scream that capital gains taxes might be being introduced, this isn’t that factually correct. What is being proposed are rules around a “fact pattern” which would then result in a person needing to pay tax on certain assets. For example, Labour’s proposed property tax is just a set of rules around a “fact-pattern” that will result in a person needing to pay tax on their capital gains. They are saying that in this set of circumstances the new rules result in the fact that someone has a primary intent of making gains. The real truth about capital gains is that policy wise, the shark already has teeth and even has plenty of hands in its mouth. It just hasn’t bitten….yet. Previous Next

< Back The SPIVA NZ Scorecard's own methodology, applied to passive NZ equity funds, produces the same flawed result Anthony Edmonds 18 Sept 2026 SPIVA's new mid-year Scorecard says 80% of active New Zealand equity funds “underperformed” the S&P/NZX 50 Index. Applying the same method to passive funds built to track the market produces a number that is just as striking, and just as unreliable. This is a short follow-up to the article titled “Index washing: how dirty data pollutes the NZ active (and passive) environment” that Aurellan Asset Management wrote about the SPIVA New Zealand Scorecard. In this follow-up article we comment on S&P Dow Jones Indices' recently published mid-year 2026 SPIVA New Zealand Scorecard data. We applied the same methodology that produced the prominent “underperformance” claim in that Scorecard to a small sample of passive New Zealand equity funds. The purpose of doing this is to highlight what we believe are flaws both in the underlying methodology and in the claim itself. SPIVA'S MID-YEAR 2026 CLAIM: NEW ZEALAND EQUITY FUNDS “As a result, 80% of funds underperformed the benchmark.” This quote comes from S&P Dow Jones Indices' SPIVA New Zealand Scorecard for NZ equities, mid-year 2026 edition, covering the six months ended 30 June 2026. To generate this statistic, S&P Dow Jones Indices appears to have taken a broad set of actively managed Australasian equity funds and compared their performance against a single index, the S&P/NZX 50 Index. No consideration appears to have been given to each individual fund's actual benchmark and mandate, which can vary widely across the universe of funds. We think this methodology is fundamentally flawed and produces unbalanced, meaningless results. When repeated in quotes like “80% of (active) funds underperformed the benchmark,” this can lead readers to the wrong conclusions about the success, or otherwise, of active management. This is a mirror repeat of the same issue we raised in our earlier article, “Index washing: how dirty data pollutes the NZ active (and passive) environment,” which focused on the 2025 SPIVA New Zealand Scorecard. THE MIRROR TEST, PART TWO In our original article we turned the Scorecard's own method back on New Zealand-available passive global equity funds. We found that 86% of a sample of index and passive global equity funds “underperformed” the S&P World Index over the three years to 31 July 2026, not because those funds are poorly run, but because none of them are actually designed to track that particular index. We concluded it was wrong to describe this as underperformance. To once again demonstrate the flaws in this approach, we applied the same methodology and index that S&P Dow Jones Indices used to assess active management to 11 passive New Zealand equity funds, using their returns for the 12 months to 31 August 2026. We chose this group of passive funds because the one-year return data was readily available, not because they represent the full population of passive New Zealand equity funds. The S&P/NZX 50 Index (Gross) returned 7.63% for the year to 31 August 2026. The result: 9 of the 11 passive funds (82%) “underperformed” the S&P/NZX 50 Index over the 1-year period. Sources: respective managers' published fact sheets and fund updates, and performance data published on www.investnow.co.nz , one-year returns to 31 August 2026. This table is provided to illustrate a methodological point. AN EXAMPLE: SIMPLICITY Simplicity's NZ Share Fund returned 6.73% for the year to 31 August 2026, against 8.40% for the S&P/NZX 50 Index (Gross), an “underperformance” of almost 1.7%. Taken on its own, that looks like the kind of gap used as evidence that a fund, or its manager, isn't doing its job. But Simplicity's own disclosed market index for this fund is the Morningstar New Zealand (total return) Index, including imputation credits, not the S&P/NZX 50. This tells us the fund is constructed, managed and benchmarked against a different, equally legitimate, measure of the New Zealand market. In our view, describing this fund as having “underperformed” a benchmark it doesn't use, and was never designed to track, risks giving readers a misleading impression of how the fund is actually managed. THE POINT, STATED PLAINLY Analysing a fund's performance against a specific index or benchmark that it does not actually use tells us nothing about the success, or otherwise, of how that fund has been managed. Furthermore, using a single index to assess a broad collection of funds that have a wide range of benchmarks doesn't produce meaningful information or insight. It certainly doesn't produce results that can be used to claim whether, collectively, a broad group of managers has over or underperformed. The same is true regardless of whether we are considering active or passive funds. A passive fund not beating the S&P/NZX 50 doesn't mean it's a poor tracker. It may be tracking a different index entirely, as Simplicity is. In our sample, 73% “underperformed” a single benchmark for essentially the same reasons active managers might: differing index providers, differing constituent weightings, and differing mandates. Demonstrating that a single benchmark can't be used to fairly judge a broad set of passive managers tracking different indices highlights why the same flawed single-benchmark approach can't be used to assess a broad range of active managers. SOME KEY POINTS TO NOTE We used one-year returns to 31 August 2026 to measure our sample of passive New Zealand equity funds, while SPIVA's “80% of funds underperformed” quote relates to its “New Zealand Equity Funds” category over the six months to 30 June 2026, a category we believe may in fact be Australasian in composition (see below). This is a different period and, on SPIVA's side, arguably a different fund universe. We used it because it was the return data we could readily obtain, not because it produces a more favourable comparison, and we want that limitation to be clear rather than buried in a footnote. It is also worth noting that the underlying Morningstar data set SPIVA's “New Zealand Equity Funds” category uses appears to be Australasian in composition, not New Zealand-only, and includes funds that invest in Australian equities (like trans-Tasman equity funds). In our view, judging funds of this nature against a single benchmark composed entirely of New Zealand equities, the S&P/NZX 50, is flawed. There is a further distortion worth flagging. Academic research we cited in our earlier “Index washing” article (Cremers, Fulkerson and Riley) found that SPIVA's US Scorecard counts every closed or merged fund as an underperformer, regardless of its actual results before closing, a bias that inflates reported underperformance over longer periods. The New Zealand Scorecard appears to apply the same convention. Its own methodology notes state that funds which do not survive the measurement period are treated as underperformers, alongside funds that survived but failed to beat the benchmark. SPIVA's own data shows why this matters. Of the NZ-based global equity funds that existed at the start of the 15 years to 30 June 2026, 68% have closed or merged over that period. On SPIVA's own methodology, 68% of NZ-based global equity funds would be said to have “underperformed” over a 15-year period, even in a scenario where every single open fund outperformed over that same period . This clearly highlights the problem that Cremers et al identified. One issue we are still investigating is whether a fund that Morningstar reclassifies is treated as having “closed,” which would potential further distort the results. THE ASK, UNCHANGED This update doesn't change what we asked the FMA to test in our original briefing. Our ask is whether the Scorecard's headline claims, and the claims of anyone repeating them commercially, have a reasonable basis under the unsubstantiated representation standard in the fair dealing provisions of the Financial Markets Conduct Act. It adds a current, concrete example: S&P Dow Jones Indices' own new mid-year number, and a same-method test showing the identical mechanism can manufacture a headline “underperformance” statistic out of funds explicitly built to track the market. We are not asking the FMA to accept our conclusion. We are asking it to assess whether SPIVA's mid-year 2026 headline claims, and this mirror-test result, both have a reasonable basis, and whether repeating either commercially, without the context set out here, amounts to fair dealing. THIS IS NOT ABOUT THE ACTIVE-PASSIVE DEBATE At Aurellan Asset Management we offer our clients both active and passive funds and solutions, and believe that both have a place within clients' portfolios. Our comments are not designed to defend active management, or to try and claim that active managers have, in general, added value. Our focus in raising these issues is about data integrity. New Zealanders make real decisions, including KiwiSaver and retirement savings decisions, on the strength of headline statistics like these. When a statistic as widely repeated as “80% of funds underperformed” is built on a single-benchmark comparison that doesn't reflect the mandates of the funds it measures, the result can mislead investors regardless of which side of the active-passive debate it appears to support. That is the concern we are asking the FMA, and S&P Dow Jones Indices, to address, not who wins the active versus passive argument. A NOTE TO THE ARTICLE SPIVA mid-year 2026 figures are drawn from S&P Dow Jones Indices' published New Zealand Scorecard ( spglobal.com/spdji ). We recommend verifying the exact figures against the primary document before relying on them. They have not been independently audited against it here. Statements about whether particular conduct breaches the fair dealing provisions or FMA guidance are the author's opinion, formed on the material set out here. They are not legal advice or a finding of any kind. The author is not a lawyer. Sample and period: the 11-fund comparison uses funds selected for readily available public return data, not the full population of New Zealand passive/index equity funds, a limitation we are disclosing, not hiding. Fund returns are to 31 August 2026. SPIVA's mid-year figures are to 30 June 2026. The two-month gap between these periods is a genuine limitation of this comparison and should be read as such. Fund data was sourced from respective managers' published fact sheets and fund updates, and www.investnow.co.nz . Simplicity's benchmark is as stated on its website. Aurellan offers both actively managed and index-tracking strategies to its clients. Nothing here should be read as a general criticism of index investing, passive management, or any named manager. Past performance is not a reliable indicator of future performance. Previous Next

< Back Aurellan Intergenerational Thinking Podcast featuring co-Founder Campbell Gower Anthony Edmonds and Campbell Gower 21 Oct 2025 In this second episode of the Aurellan Podcast, Campbell shares how he helped build enduring New Zealand brands like Charlie’s Juice, Mountain Buggy and phil&teds — and why the Gower Family Office chose to back Aurellan Asset Management. The latest episode of the Aurellan podcast is available on the following platforms: Apple Spotify iHeart Radio Or view below: Previous Next

< Back Aurellan Intergenerational Thinking Podcast featuring co-Founder Anthony Edmonds Anthony Edmonds and Chris Di Leva 10 Oct 2025 Aurellan CEO and CIO, Chris Di Leva interviews fellow co-Founder Anthony Edmonds. This conversation covers Anthony's lucky break which got him into investments to founding and exiting three successful investment businesses. View on the following platforms: Youtube Apple Spotify iHeart Radio Previous Next

< Back Di Leva, Edmonds partner in new investment management business - Investment News David Chaplin - Investment News NZ 20 Aug 2025 After months of speculation, former Apex NZ chief, Anthony Edmonds, has emerged with a new investment management firm to be headed by ex Harbour multi-asset specialist, Chris Di Leva. Read the full article here Previous Next

< Back KiwiSaver investors are taking on more risk, what it could mean for the next crisis Chris Di Leva 6 Oct 2026 55% of investors now in Growth and Aggressive Funds. Would the downside scenarios come as a surprise? KiwiSaver investors are taking on more risk. What it could mean for the next crisis. 2008, 2000, 1997 and 1987 are all periods that are etched in investors' memories. Starting out working in markets not long after the 2008 downturn, I walked into a market where US equities were maligned, investing in bonds was in vogue, and cash was king. The numbers later in this article will show you why. How things have changed. While I don’t doubt many of the changes we've seen in KiwiSaver over the past decade have been the right thing, such as changing the default option from conservative funds to balanced ones, some trends are converging which I think are worth paying close attention to. But before we dig into this, let’s take a quick lesson from a scene in the Paddington Bear movie that my kids absolutely love. Mr Brown, a risk analyst no less, is on the phone urgently racing to lock in insurance cover for having a bear in the house, before Paddington floods the bathroom upstairs. It gets a laugh every time in our house (almost as much as the haircut scene in Paddington 2). It is also a pretty good description of how most investors approach risk and diversification. Nobody thinks about it while the bath is filling up, but everybody wants it once the water starts coming through the ceiling. I do worry, however, that when it comes to risk, KiwiSaver members may not appreciate just how full the bath has become. We are taking on more risk Over the past ten years, KiwiSaver investors have taken more risk in their portfolios. A decade ago, growth and aggressive funds, as defined in the Morningstar KiwiSaver Survey, held a combined 29.6% of total KiwiSaver investors’ funds under management. Today that number is close to double, at 54.9%. But the increase in risk does not stop there. The second shift is inside each type of diversified fund peer group, and it gets less attention. KiwiSaver balanced funds in 2016 on average held 53.2% in growth assets like global and New Zealand equities, while today they hold 58%. Diversified growth funds have gone from 70.2% to 74%, and aggressive funds have gone from 85.1% to 95%. While the labels have stayed the same, the portfolios behind them have been drifting more towards growth assets. Some of this is deliberate and defensible. The default change in 2021 did real work, moving default investors from conservative to balanced. Some of it is simply the arithmetic of a bull market. Over the ten years to June 2026 the aggressive category returned 10.3% per annum against 4.1% for the conservative category, so the growth in money has compounded into a larger proportion of the total pool of assets regardless of whether a single member switches. Risk has been rewarded, and reward has bred more risk. Below we look at the proportion of KiwiSaver in each fund type, then we look at the amount of growth assets within each fund type. Source: Morningstar KiwiSaver Survey, June 2016; Morningstar KiwiSaver 360, June 2026. Shares are of multisector funds only. Default options sit within Conservative in 2016 and within Balanced in 2026. Most of our risk is in the global equity market Here is the part that interests me more. It isn't just that we hold more growth assets, it is that the growth assets we hold have become less diversified than they were in the past. Across the whole KiwiSaver system, growth assets rose from 45% to 64% over the decade, a 19 percentage point increase in absolute terms. International shares rose from 25.7% to 45.4%, an almost 20 percentage point increase. In other words, every single percentage point of added risk went into one asset class, being global shares. Everything that might have diversified that exposure went backwards. Exposure to listed local and global property fell from 4.3% to 1.9%. The "other" line, where alternatives like private equity would show up, fell from 1.3% to 0.4%. Only NZ unlisted property rose, NZ 0.5% to 0.9%, and yet that is still a rounding error. Global equities now make up three-quarters of KiwiSaver's total equity exposure, up from two-thirds. A single asset class now accounts for 45 cents of every dollar of New Zealand's retirement savings. Source: Morningstar estimated KiwiSaver market asset allocation, June 2016 and June 2026. Now compare that with Australia. Australian super has also gone global as the savings pool scaled; it used that scale to buy diversification by investing in asset classes such as unlisted infrastructure, unlisted property, private equity, and private credit. Whereas KiwiSaver has scaled from $33 billion to $148 billion and bought more global equities as a portion of the total savings pool. As can be seen below, Australian Superannuation Funds hold almost 15 percentage points more in Private Assets and Alternatives than KiwiSaver Funds. Their default product goes further still. In Australia, MySuper holds 11% in infrastructure, 6% in unlisted private equity and 5% in unlisted property, which puts more than a fifth of Australia's default retirement savings in unlisted and alternative assets. Sources: Morningstar KiwiSaver 360, June 2026; ASFA Super Stats (September 2026), citing APRA quarterly superannuation statistics for the June 2026 quarter. Domestic Shares for NZ include NZ and Australian. Infrastructure in the APRA survey is assumed to be unlisted. The gap is not a rounding difference, and it is not explained by Australia being a more growth-oriented system. This is reflected by the fact that their total listed equity weighting is lower than ours. But you don’t necessarily have to cross the Tasman to find the contrast. The NZ Superannuation Fund holds around a quarter of its portfolio in a range of private markets and alternatives investments, ranging from timberlands, liquid alternatives, private equity, venture capital, carbon credits, real estate and infrastructure. At the Government Superannuation Fund, managed by Annuitas, their target portfolio has almost 23% allocated to global private equity, NZ private equity, catastrophe risk and life settlements. Certainly, in our own work at Aurellan with wholesale and institutional investors, we have been adding return streams that are less correlated with global equities to make portfolios more resilient. How would each fund fare in previous downturns? This brings us to the risk. KiwiSaver funds have become more reliant on global shares just as the global share market itself has become more concentrated. The diversification we thought we were buying has been quietly withdrawn from under us. The numbers over the same decade are remarkable. The top 10 holdings of the MSCI World accounted for around 8% of the index ten years ago. Today that number is around 25%, with the US weight around 70%. Robeco frames this well, highlighting that the effective number of stocks driving the majority of the performance of the MSCI World Index has fallen from more than 300 in 2005 to 84 in October 2025. The market may contain thousands of listed companies, but owning the index has increasingly resembled owning just a few. So, a member in a KiwiSaver growth fund today holds more equity, more of it offshore, and that offshore equity exposure is itself the most concentrated it has been in fifty years. Three trends are compounding in the same direction. The question worth asking is not whether this has worked. It plainly has. The question is what it does to the downside. A useful exercise we do with our clients is to provide portfolio stress tests (on the upside and downside) on a forward and backward-looking basis to help determine actual risk tolerance. Some examples of backward-looking downside stress tests are shown below as well as explanations of each scenario. These are not doomsday predictions; they are actual index returns applied to current KiwiSaver asset allocations. It shows that, for example, using today’s asset allocations of the average aggressive fund, returns would have been down by 37% peak to trough in the Global Financial Crisis or down 29% during the tech bubble. Interestingly in both crises, it would have taken the investor over five years to recover their original capital they had heading into each of the crises. The tech bubble sell-off lasted from early 2000 to early 2002. Even with dividends reinvested, an investment in the Nasdaq-100 bottomed on 9 October 2002 at an 83% decline from its March 2000 peak. While the fall in markets took the escalator, unfortunately the recovery took the stairs. With dividends reinvested, the investment first returned to even in February 2015, nearly 15 years after the purchase. And even that didn't last: it slipped back below its starting value repeatedly over the following 16 months before moving above it for good in mid-2016. The investor who bought the market leaders of 2000 waited 15 years just to get their money back. Even then, a broad S&P 500 fund bought at the same time had done a little better. In the Global Financial Crisis the S&P 500 fell 55% from its October 2007 peak to March 2009. Yet a diversified investor was only back to even by March 2012, about four and a half years after the peak. Banks, the market's largest sector going into the crisis, fared far worse. European banks fell 82% on a total return basis, against 59% for the broader European market, and US financials fell 83%. US financials took around a decade to regain their 2007 peak. European banks took around 18 years and only got there after strong gains in 2024 and 2025. Source: Morningstar KiwiSaver 360, June 2026; asset class splits estimated by Aurellan by applying the market-wide asset mix to each peer group's growth-asset share. Some assumptions around index use and hedging percentages have been made as these are not uniform across funds. Returns are gross of fees and tax. The tech bubble case deserves particular attention. It was a drawdown concentrated in exactly the part of the market that has come to dominate the index, and one where NZ equities, listed property and cash did most of the diversifying work. In today’s portfolios, those are the allocations that have shrunk. Conclusion None of this is an argument for going back to conservative default funds. Higher growth allocations for members with thirty years ahead of them are the right call, and the last decade has borne this out. It is an argument about the composition of that risk, not the quantity. We have concentrated an entire nation's retirement savings into a single factor, global listed equity beta, at the precise moment that factor became the most concentrated it has been in living memory. And we have funded that concentration at the expense of diversification. The obvious focus for the industry is to look at how we can provide KiwiSaver investors with greater diversification within the growth parts of their portfolios beyond traditional listed global and local equities. The Australian industry provides us with a great place to start looking at how they have introduced greater diversification into their nation’s long-term saving pool as have some of NZ’s largest long-term investors. For now, the bath is filling and the water isn't on the floor, yet. Returns have been excellent, members are better off, and it feels like there is no crisis to respond to. That is exactly why now is the time to look at it. The funds that handle the next downturn well will be the ones that do the work before the crisis starts. Mr Brown, a risk analyst by trade, would approve. Previous Next